Question 1

Figure 3-4

-Refer to Figure 3-4. For Ben, what is the opportunity cost of one bottle of wine?

Accepted Answer

A)  1/4 bottle of beer 
B)  1/2 bottle of beer 
C)  2 bottles of beer 
D)  4 bottles of beer

Question 2

Suppose that a worker in Taiwan can make 2 TVs or 10 pairs of shoes per week, and a worker in Korea can make 3 TVs or 20 pairs of shoes per week.
a. In what sense do TVs and shoes cost less in Korea than in Taiwan
b. In what sense do TVs cost less in Taiwan than in Korea?
c. If Taiwan and Korea were to engage in trade, which country would export which good?
d. How would the answer to the question in part c change if a worker in Korea could make 4 TVs per week?

Accepted Answer

The answer of Suppose that a worker in Taiwan can...

Question 3

-Refer to Table 3-5. If Denmark and Italy trade based on the principle of comparative advantage, which country will export or import each product?

Accepted Answer

A)  Denmark will export bread, and Italy will export cheese. 
B)  Denmark will export bread, and Italy will export bread. 
C)  Denmark will export cheese, and Italy will export cheese. 
D)  Denmark will export cheese, and Italy will export bread.

Question 4

-Refer to Table 3-3. What does each of the two producers have a comparative or absolute advantage in?

Accepted Answer

A)  Kevin has an absolute advantage in blankets, and Amy has a comparative advantage in sweaters. 
B)  Kevin has an absolute advantage in both goods, and Amy has a comparative advantage in blankets. 
C)  Kevin has an absolute advantage in sweaters, and Amy has a comparative advantage in sweaters. 
D)  Kevin has an absolute advantage in neither good, and Amy has a comparative advantage in sweaters.

Question 5

Figure 3-6
These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery.
 
-Refer to Figure 3-6. What is the opportunity cost of one pie for Betty?

Accepted Answer

A)  1/4 loaf of bread 
B)  3/4 loaf of bread 
C)  1 loaf of bread 
D)  4/3 loaves of bread

Question 6

Which of the following is NOT an implication of our model of trade?

Accepted Answer

A)  Trade allows for specialization. 
B)  Trade is good for nations. 
C)  Trade is based on absolute advantage. 
D)  Trade allows individuals to consume more than otherwise.

Question 7

Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 5 televisions per year. Each nation has 100 workers. If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year, what is the impact on each country's maximum consumption of new radios and televisions per year?

Accepted Answer

A)  higher than it would be in the absence of trade because of the gains from trade 
B)  the same as it would be in the absence of trade 
C)  less than it would be in the absence of trade because neither country is specializing in the product for which it has a comparative advantage 
D)  less than it would be in the absence of trade because Teeveeland has an absolute advantage in both goods and so would lose if it trades with Radioland

Question 9

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 10

-Refer to Table 3-5. How could Denmark and Italy benefit?

Accepted Answer

A)  by Denmark specializing in bread and Italy specializing in cheese 
B)  by Denmark specializing in cheese and Italy specializing in bread 
C)  by Denmark specializing in both goods and Italy specializing in neither good 
D)  by Denmark specializing in neither good and Italy specializing in both goods

Question 11

-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

Question 12

-Refer to Table 3-5. Which country has an absolute or comparative advantage in each product?

Accepted Answer

A)  Japan has an absolute advantage in both goods, and Canada has a comparative advantage in cars. 
B)  Japan has an absolute advantage in both goods, and Canada has a comparative advantage in neither good. 
C)  Japan has an absolute advantage in cars, and Canada has a comparative advantage in airplanes. 
D)  Japan has an absolute advantage in airplanes, and Canada has a comparative advantage in cars.

Question 13

-Refer to Table 3-2. What is the opportunity cost of 1 kilogram of meat for the rancher?

Accepted Answer

A)  4 hours of labour 
B)  6 hours of labour 
C)  3/2 kilograms of potatoes 
D)  2/3 kilogram of potatoes

Question 14

Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a producer requires a smaller quantity of inputs to produce carrots than to produce onions. Is this information sufficient to determine in which good the producer has a comparative advantage?

Accepted Answer

A)  Yes, the producer has a comparative advantage in carrots. 
B)  Yes, the producer has a comparative advantage in onions. 
C)  No, because information about the costs of inputs is missing. 
D)  No, because information about other producers is missing.

Question 16

Figure 3-3
Ice cream and cones are measured in kilograms.
 
-Refer to Figure 3-3. Suppose that Ben and Jerry have both decided to produce at point A on their production possibilities frontiers. What can we infer from this information?

Accepted Answer

A)  that this is not an efficient combination for neither Ben nor Jerry 
B)  that Ben and Jerry are both allocating 1/2 their time to the production of each good 
C)  that no other production point is as efficient for both Ben and Jerry to produce as point A 
D)  that the two must be trading with each other

Question 17

Figure 3-4

-Refer to Figure 3-4. What does each of the two producers have an absolute advantage in?

Accepted Answer

A)  Ben has an absolute advantage in wine, and Jerry has an absolute advantage in neither good. 
B)  Ben has an absolute advantage in beer, and Jerry has an absolute advantage in wine. 
C)  Ben has an absolute advantage in wine, and Jerry has an absolute advantage in beer. 
D)  Ben has an absolute advantage in neither good, and Jerry has an absolute advantage in both goods.

Question 18

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 6 tables or 18 chairs, where Sandy can make 5 tables or 25 chairs. Who has an absolute advantage in which product?

Accepted Answer

A)  Mike in chairs, Sandy in tables 
B)  both Mike and Sandy in tables 
C)  both Mike and Sandy in chairs 
D)  Mike in tables, Sandy in chairs

Question 19

Figure 3-2
 
-Refer to Figure 3-2. What do the two producers have an absolute advantage in?

Accepted Answer

A)  Paul has an absolute advantage in both wheat and corn. 
B)  Paul has an absolute advantage in wheat, and Cliff has an absolute advantage in corn. 
C)  Cliff has an absolute advantage in wheat, and Paul has an absolute advantage in corn. 
D)  Cliff has an absolute advantage in both wheat and corn.

Question 20

-Refer to Table 3-1. How could the farmer and rancher both benefit?

Accepted Answer

A)  by the farmer specializing in meat and the rancher specializing in potatoes 
B)  by the farmer specializing in potatoes and the rancher specializing in meat 
C)  by the farmer specializing in neither good and the rancher specializing in both goods 
D)  by the farmer specializing in both goods and the rancher specializing in neither good

Exam 3: Interdependence and the Gains From Trade

Figure 3-4 -Refer to Figure 3-4. For Ben, what is the opportunity cost of one bottle of wine?