Question 1

If it takes Canadian workers fewer hours to produce every good than it takes French workers, Canada cannot gain from trade with France.

Accepted Answer

A) True 
 B)False

Question 2

-Refer to Table 3-2. What does each producer have a comparative advantage in?

Accepted Answer

A)  The rancher has a comparative advantage in neither good, and the farmer has a comparative advantage in both goods. 
B)  The rancher has a comparative advantage in both goods, and the farmer has a comparative advantage in neither good. 
C)  The rancher has a comparative advantage in meat, and the farmer has a comparative advantage in potatoes. 
D)  The rancher has a comparative advantage in potatoes, and the farmer has a comparative advantage in meat.

Question 3

If there is trade, which of the following is most likely?

Accepted Answer

A)  A country is worse off because it becomes dependent on other countries. 
B)  A country will produce a greater variety of goods and services to trade. 
C)  A country's consumption possibilities frontier can be outside its production possibilities frontier. 
D)  A country will experience a lower unemployment rate.

Question 4

Figure 3-3
Ice cream and cones are measured in kilograms. 
-Refer to Figure 3-3. Suppose Ben and Jerry were both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 kg of cones to get 2 kg of ice cream from Jerry. If both decided to specialize in what they had a comparative advantage in and trade, what would be the gains from trade?

Accepted Answer

A)  1 kg of cones for Ben and 1 kg of ice cream for Jerry 
B)  1 kg of ice cream for Ben and 1 kg of cones for Jerry 
C)  2 kg of ice cream for Ben and 2 kg of cones for Jerry 
D)  2 kg of ice cream for Ben and 1 kg of cones for Jerry

Question 5

What is David Ricardo's contribution?

Accepted Answer

A)  He wrote books opposing the ideas of Adam Smith. 
B)  He was the founder of modern economics. 
C)  He argued in favour of Britain following a free-trade policy. 
D)  He wrote An Inquiry into the Nature and Causes of the Wealth of Nations.

Question 6

-Refer to Table 3-5. If Japan and Canada open up trade based on the principle of comparative advantage, who loses in the short term in Canada?

Accepted Answer

A)  consumers 
B)  workers in airplane-producing companies 
C)  owners of airplane-producing companies 
D)  owners of car-producing companies

Question 7

-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, at what price would the two countries trade?

Accepted Answer

A)  at a price somewhere between the opportunity costs of the two countries 
B)  at a price exactly in the middle of the opportunity costs of the two countries 
C)  a price equal to Canada's opportunity cost 
D)  at a price equal to Japan's opportunity cost

Question 8

Figure 3-1 
-Refer to Figure 3-1. Assume that both Paul and Cliff divide their time equally between the production of corn and wheat, and they do not trade. If they were the only producers of corn and wheat, what would the total production of wheat and corn be?

Accepted Answer

A)  8 bushels of wheat and 7 bushels of corn 
B)  7 bushels of wheat and 6 bushels of corn 
C)  6 bushels of wheat and 8 bushels of corn 
D)  7 bushels of wheat and 7 bushels of corn

Question 9

-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what could Japan gain from exporting a car?

Accepted Answer

A)  a maximum of 1/6 airplane 
B)  a maximum of 1/4 airplane 
C)  a maximum of 1/3 airplane 
D)  a maximum of 3 airplanes

Question 10

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Accepted Answer

A) True 
 B)False

Question 11

Trade allows a country to consume outside its production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 12

Makena and Renee work for a home cleaning company and they form a team. In each room, there are two broad cleaning areas: floor and windows. Makena can do a floor in 40 minutes and windows in 25 minutes. Renee does floors in 30 minutes and windows in 30 minutes.
a. How long does it take to clean an apartment with 4 rooms if Makena takes 2 rooms and Renee takes 2 rooms, assuming that if one finishes earlier she takes a break waiting for the other?
b. Later on, they decide that if one finishes earlier she would help the other to finish so that they can move on to another client. How long does it take now to finish?
c. After a while, they realize that it is better if one does the floors in all rooms and the other does the windows. How long does it take now?

Accepted Answer

The answer of Makena and Renee work for a home...

Question 13

Egypt has a comparative advantage in the production of linen and an absolute advantage in the production of beer, compared to Russia. If these two countries decide to trade, what would the pattern of trade be?

Accepted Answer

A)  Egypt would export linen to Russia. 
B)  Russia would export linen to Egypt. 
C)  Egypt would export both beer and linen to Russia. 
D)  Russia would export both beer and linen to Egypt.

Question 14

Suppose a producer can produce shirts with lower opportunity cost than jeans. What else do we need to know if we want to determine this producer's comparative advantage?

Accepted Answer

A)  how this producer's opportunity cost compares with other producer's opportunity cost 
B)  nothing, the producer has a comparative advantage in jeans. 
C)  how many hours of work each product requires 
D)  nothing, the producer has a comparative advantage in shirts

Question 15

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. 
-Refer to Figure 3-5. What is the opportunity cost of one pair of ballet slippers for Ginger?

Accepted Answer

A)  1/4 pair of tap shoes 
B)  1/3 pair of tap shoes 
C)  3/4 pair of tap shoes 
D)  4/3 pairs of tap shoes

Question 16

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. 
-Refer to Figure 3-5. What is the opportunity cost of one pair of tap shoes for Ginger?

Accepted Answer

A)  1/4 pair of ballet slippers 
B)  1/3 pair of ballet slippers 
C)  3/4 pair of ballet slippers 
D)  4/3 pairs of ballet slippers

Question 17

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. 
-Refer to Figure 3-5. What should Fred and Ginger produce?

Accepted Answer

A)  Fred should produce tap shoes, and Ginger should produce ballet slippers. 
B)  Fred should produce tap shoes and ballet slippers, and Ginger should produce ballet slippers. 
C)  Fred should produce tap shoes, and Ginger should produce ballet slippers and tap shoes. 
D)  Fred should produce ballet slippers, and Ginger should produce tap shoes.

Question 18

-Refer to Table 3-6. If Denmark and Italy specialize and trade according to their respective comparative advantage, who gains in the short run in Denmark?

Accepted Answer

A)  owners of cheese-producing companies 
B)  owners of milk-producing companies 
C)  consumers who like cheese 
D)  consumers who like bread

Question 19

-Refer to Table 3-3. What is the opportunity cost of one sweater for Courtney?

Accepted Answer

A)  2 coats 
B)  3 coats 
C)  4 coats 
D)  5 coats

Question 20

-Refer to Table 3-5. How could Canada and Japan both benefit?

Accepted Answer

A)  by Canada specializing in airplanes and Japan specializing in airplanes 
B)  by Canada specializing in cars and Japan specializing in airplanes 
C)  by Canada specializing in airplanes and Japan specializing in cars 
D)  by Canada specializing in neither good and Japan specializing in both goods

Exam 3: Interdependence and the Gains From Trade

If it takes Canadian workers fewer hours to produce every good than it takes French workers, Canada cannot gain from trade with France.

-Refer to Table 3-2. What does each producer have a comparative advantage in?

If there is trade, which of the following is most likely?

What is David Ricardo's contribution?

-Refer to Table 3-5. If Japan and Canada open up trade based on the principle of comparative advantage, who loses in the short term in Canada?

-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, at what price would the two countries trade?

Figure 3-1 -Refer to Figure 3-1. Assume that both Paul and Cliff divide their time equally between the production of corn and wheat, and they do not trade. If they were the only producers of corn and wheat, what would the total production of wheat and corn be?

-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what could Japan gain from exporting a car?

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Trade allows a country to consume outside its production possibilities frontier.

Egypt has a comparative advantage in the production of linen and an absolute advantage in the production of beer, compared to Russia. If these two countries decide to trade, what would the pattern of trade be?

Suppose a producer can produce shirts with lower opportunity cost than jeans. What else do we need to know if we want to determine this producer's comparative advantage?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5. What is the opportunity cost of one pair of ballet slippers for Ginger?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5. What is the opportunity cost of one pair of tap shoes for Ginger?

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5. What should Fred and Ginger produce?

-Refer to Table 3-6. If Denmark and Italy specialize and trade according to their respective comparative advantage, who gains in the short run in Denmark?

-Refer to Table 3-3. What is the opportunity cost of one sweater for Courtney?

-Refer to Table 3-5. How could Canada and Japan both benefit?