Question 1

Table 3-30
Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate.
 
-Refer to Table 3-30. Varick has an absolute advantage in the production of

Accepted Answer

A)   wheat.
B)   cloth.
C)   both goods.
D)   neither good. B

Question 2

Comparative advantage is related most closely to which of the following?

Accepted Answer

A)   output per hour
B)   opportunity cost
C)   efficiency
D)   bargaining strength in international trade B

Question 3

Goods produced abroad and sold domestically are called

Accepted Answer

A)   exports.
B)   imports.
C)   exchange rates.
D)   opportunity costs. B

Question 4

Table 3-21
Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day.
 
-Refer to Table 3-21. Suppose Jamaica decides to increase its production of radios by 12. What is the opportunity cost of this decision?

Accepted Answer

A)   3 coolers
B)   6 coolers
C)   12 coolers
D)   24 coolers

Question 5

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 4 televisions per year. Each nation has 100 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

Accepted Answer

A)   100 radios, 300 televisions in Radioland and 300 radios, 100 televisions in Teeveeland.
B)   300 radios, 100 televisions in Radioland and 100 radios, 300 televisions in Teeveeland.
C)   200 radios, 100 televisions in Radioland and 100 radios, 200 televisions in Teeveeland.
D)   300 radios, 100 televisions in Radioland and 100 radios, 400 televisions in Teeveeland.

Question 6

Adam Smith

Accepted Answer

A)   and David Ricardo both opposed free trade.
B)   opposed free trade, but David Ricardo supported it.
C)   supported free trade, but David Ricardo opposed it.
D)   and David Ricardo both supported free trade.

Question 7

Table 3-41
 
-Refer to Table 3-41. Which country has a comparative advantage in producing compasses?

Accepted Answer

The answer of Table 3-41
 
-Refer to Table 3-41. Which...

Question 8

Figure 3-15
Perry's Production Possibilities Frontier Jordan's Production Possibilities Frontier
 
-Refer to Figure 3-15. The opportunity cost of 1 poem for Perry is

Accepted Answer

A)   1/12 novel.
B)   1/6 novel.
C)   2 novels.
D)   6 novels.

Question 9

Figure 3-18
Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier 
-Refer to Figure 3-18. The opportunity cost of 1 bowl for Bintu is

Accepted Answer

A)   1/4 cup.
B)   1/2 cup.
C)   2 cups.
D)   4 cups.

Question 10

Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds) that the nation of Bonovia could produce in a given month. 
-Refer to Figure 3-11. If the production possibilities frontier shown is for 240 hours of production, then which of the following combinations of ham and cheese could Bonovia produce in 240 hours?

Accepted Answer

A)   225 pounds of ham and 140 pounds of cheese
B)   280 pounds of ham and 100 pounds of cheese
C)   355 pounds of ham and 80 pounds of cheese
D)   330 pounds of ham and 60 pounds of cheese

Question 11

Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate.
 
-Refer to Table 3-20. At which of the following prices would both Brad and Theresa gain from trade with each other?

Accepted Answer

A)   12 bushels of wheat for 6 pounds of beef
B)   12 bushels of wheat for 8 pounds of beef
C)   12 bushels of wheat for 12 pounds of beef
D)   Brad and Theresa could not both gain from trade with each other at any price.

Question 12

With eight hours of work Elmer can produce 20 pounds of carrots or 15 pounds of peas. With eight hours Bugs can produce 10 pounds of carrots or 7.5 pounds of peas. Can Elmer and Bugs gain from trade? Defend your answer.

Accepted Answer

The answer of With eight hours of work Elmer can...

Question 13

Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed that Xenophobia should become self-sufficient, so it would not engage in foreign trade. From an economic perspective, this idea would

Accepted Answer

A)   make sense if Xenophobia had an absolute advantage in all goods.
B)   make sense if Xenophobia had no absolute advantages in any good.
C)   not make sense as long as Xenophobia had a comparative advantage in some good.
D)   not make sense as long as Xenophobia had an absolute advantage in at least half the goods that could be traded.

Question 14

Table 3-16
The following table contains some production possibilities for an economy for a given month.
 
-Refer to Table 3-16. If the production possibilities frontier is a straight line, then "?" must be

Accepted Answer

A)   200.
B)   300.
C)   400.
D)   500.

Question 15

When a country has a comparative advantage in producing a certain good,

Accepted Answer

A)   the country should import that good.
B)   the country should produce just enough of that good for its own consumption.
C)   the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good.
D)   None of the above is correct.

Question 16

Table 3-16
The following table contains some production possibilities for an economy for a given month.
 
-Refer to Table 3-16. If the production possibilities frontier is bowed outward, then "?" could be

Accepted Answer

A)   200.
B)   300.
C)   400.
D)   500.

Question 17

Interdependence among individuals and interdependence among nations are both based on the gains from trade.

Accepted Answer

A) True 
 B)False

Question 18

Figure 3-17
Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier
 
-Refer to Figure 3-17. Daisy has an absolute advantage in the production of

Accepted Answer

A)   both goods and a comparative advantage in the production of pies.
B)   both goods and a comparative advantage in the production of tarts.
C)   neither good and a comparative advantage in the production of pies.
D)   neither good and a comparative advantage in the production of tarts.

Question 19

When there are two people and each is capable of producing two goods, it is possible for one person to have a comparative advantage over the other in both goods.

Accepted Answer

A) True 
 B)False

Question 20

Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate.
 
-Refer to Table 3-20. What is Theresa's opportunity cost of producing one pound of beef?

Accepted Answer

A)   5/6 bushel of wheat
B)   6/5 bushel of wheat
C)   3/5 bushel of wheat
D)   5/3 bushels of wheat

Exam 3: Interdependence and the Gains From Trade

Table 3-30 Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. -Refer to Table 3-30. Varick has an absolute advantage in the production of

Comparative advantage is related most closely to which of the following?

Goods produced abroad and sold domestically are called

Adam Smith

Table 3-41 -Refer to Table 3-41. Which country has a comparative advantage in producing compasses?

Figure 3-15 Perry's Production Possibilities Frontier Jordan's Production Possibilities Frontier -Refer to Figure 3-15. The opportunity cost of 1 poem for Perry is

Figure 3-18 Bintu's Production Possibilities Frontier Juba's Production Possibilities Frontier -Refer to Figure 3-18. The opportunity cost of 1 bowl for Bintu is

Table 3-20 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-20. At which of the following prices would both Brad and Theresa gain from trade with each other?

With eight hours of work Elmer can produce 20 pounds of carrots or 15 pounds of peas. With eight hours Bugs can produce 10 pounds of carrots or 7.5 pounds of peas. Can Elmer and Bugs gain from trade? Defend your answer.

Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed that Xenophobia should become self-sufficient, so it would not engage in foreign trade. From an economic perspective, this idea would

Table 3-16 The following table contains some production possibilities for an economy for a given month. -Refer to Table 3-16. If the production possibilities frontier is a straight line, then "?" must be

When a country has a comparative advantage in producing a certain good,

Table 3-16 The following table contains some production possibilities for an economy for a given month. -Refer to Table 3-16. If the production possibilities frontier is bowed outward, then "?" could be

Interdependence among individuals and interdependence among nations are both based on the gains from trade.

Figure 3-17 Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier -Refer to Figure 3-17. Daisy has an absolute advantage in the production of

When there are two people and each is capable of producing two goods, it is possible for one person to have a comparative advantage over the other in both goods.

Table 3-20 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-20. What is Theresa's opportunity cost of producing one pound of beef?