Question 1

If technology improves or the amounts of available resources increase, the:

Accepted Answer

A)   absolute advantage of producing goods and services declines.
B)   redistribution effects of international trade disappear.
C)   production possibilities frontier shifts outward.
D)   potential for gains from international trade disappears. D

Question 2

The points at which a country-s production possibilities frontier touches each of the coordinate axes measure:

Accepted Answer

A)   the redistributive effect of opting for one technology over another.
B)   the redistributive effect of trading one item rather than another.
C)   the levels of output that can be produced if resources that otherwise could produce other items are left idle and unused.
D)   the maximum quantities of each good that residents can produce using all resources. D

Question 3

Without trade, the production possibilities frontier also depicts a nation-s consumption possibilities.

Accepted Answer

A) True 
 B)False  True

Question 4

The opportunity cost of producing an additional unit of an item typically decreases as the more units of that item are produced.

Accepted Answer

A) True 
 B)False

Question 5

If one nation-s production possibilities frontier is always located inside another country-s production possibilities frontier, then the two nations may nevertheless experience gains from international trade.

Accepted Answer

A) True 
 B)False

Question 6

Absolute advantage is the term for a situation in which engaging in international trade redistributes more income from one industry to another than is the case in other countries.

Accepted Answer

A) True 
 B)False

Question 7

Gains from trade occur for an individual nation when international trade results in:

Accepted Answer

A)   constraining consumption possibilities to the nation-s individual production possibilities
B)   an increase in the nation-s consumption possibilities beyond its individual production possibilities
C)   an absolute advantage
D)   gains from trade

Question 8

A redistribution effect of international trade unambiguously involves:

Accepted Answer

A)   a shift of income from people affiliated with one set of industries to people associated with other industries.
B)   an equiproportionate expansion of consumption possibilities for all of a nation-s residents.
C)   a situation in which the nation has no comparative advantage.
D)   a situation in which the nation experiences no absolute advantage.

Question 9

After residents of two nations specialize in producing different items and engage in international trade, each country's economy's consumption possibilities are typically located at points outside their production possibilities frontiers.

Accepted Answer

A) True 
 B)False

Question 10

The slope of a line tangent to a nation-s production possibilities frontier reflects the opportunity cost of producing more of the good on the vertical axis.

Accepted Answer

A) True 
 B)False

Question 11

The slope of a line tangent to a country's production possibilities frontier measures the opportunity cost its residents incur when they opt to produce an additional unit of a good or service.

Accepted Answer

A) True 
 B)False

Question 12

If a nation has an absolute advantage in producing a good:

Accepted Answer

A)   it necessarily has a comparative advantage.
B)   it will export that good.
C)   it necessarily has a comparative disadvantage.
D)   it may export or import that good, depending on whether it has a comparative advantage.

Question 13

The production possibilities frontier is __________ because, as more of a country's fixed resources are used to produce an item using the same technology, the opportunity cost of producing the item usually __________.

Accepted Answer

A)   convex; rises
B)   convex; falls
C)   concave; rises
D)   concave; falls

Question 14

If there is international trade, then a nation's consumption possibilities are __________ its production possibilities.

Accepted Answer

A)   the same as
B)   less than
C)   greater than
D)   steeper than

Question 15

Absolute advantage exists when residents of one country can produce a good or service at lower opportunity cost than residents of another country.

Accepted Answer

A) True 
 B)False

Question 16

If the opportunity cost of producing an additional good is always the same to residents of a nation, no matter how many units they produce, the production possibilities frontier would be a convex curve.

Accepted Answer

A) True 
 B)False

Question 17

Absolute advantage is required for residents of nations to gain from international trade.

Accepted Answer

A) True 
 B)False

Question 18

In country A, the opportunity cost of producing 2,000 pounds of microprocessors is 4,000 tablet devices. In country B, the opportunity cost of 3,000 tablet devices is 4,000 pounds of microprocessors. Both countries can experience gains from trade if the exchange rate for a ton of cereal is 3 tablet devices per pound of microprocessors.

Accepted Answer

A) True 
 B)False

Question 19

In country A, the opportunity cost of 50 flash drives is 100 e-books. In country B, the opportunity cost of 50 flash drives is 40 e-books. Country A has a comparative advantage in flash drive production.

Accepted Answer

A) True 
 B)False

Question 20

Consider two nations, country A and country B, that produce goods X and Y. The production possibility frontiers for the two nations are graphed with units of good Y measured vertically and units of good X measured horizontally. At the two nation-s current points along their frontiers, the slope of a tangent line is steeper for country A than for country B. We can conclude that:

Accepted Answer

A)   country A has an absolute advantage in producing good X.
B)   country B has an absolute advantage in producing good X.
C)   country A has a comparative advantage in producing good X.
D)   country B has a comparative advantage in producing good X.

Exam 2: Comparative Advantage: How Nations Can Gain From International Trade

If technology improves or the amounts of available resources increase, the:

The points at which a country-s production possibilities frontier touches each of the coordinate axes measure:

Without trade, the production possibilities frontier also depicts a nation-s consumption possibilities.

The opportunity cost of producing an additional unit of an item typically decreases as the more units of that item are produced.

If one nation-s production possibilities frontier is always located inside another country-s production possibilities frontier, then the two nations may nevertheless experience gains from international trade.

Absolute advantage is the term for a situation in which engaging in international trade redistributes more income from one industry to another than is the case in other countries.

Gains from trade occur for an individual nation when international trade results in:

A redistribution effect of international trade unambiguously involves:

After residents of two nations specialize in producing different items and engage in international trade, each country's economy's consumption possibilities are typically located at points outside their production possibilities frontiers.

The slope of a line tangent to a nation-s production possibilities frontier reflects the opportunity cost of producing more of the good on the vertical axis.

The slope of a line tangent to a country's production possibilities frontier measures the opportunity cost its residents incur when they opt to produce an additional unit of a good or service.

If a nation has an absolute advantage in producing a good:

The production possibilities frontier is because, as more of a country's fixed resources are used to produce an item using the same technology, the opportunity cost of producing the item usually .

If there is international trade, then a nation's consumption possibilities are __________ its production possibilities.

Absolute advantage exists when residents of one country can produce a good or service at lower opportunity cost than residents of another country.

If the opportunity cost of producing an additional good is always the same to residents of a nation, no matter how many units they produce, the production possibilities frontier would be a convex curve.

Absolute advantage is required for residents of nations to gain from international trade.

In country A, the opportunity cost of 50 flash drives is 100 e-books. In country B, the opportunity cost of 50 flash drives is 40 e-books. Country A has a comparative advantage in flash drive production.