Question 1

When each person specializes in producing the good for which he or she has a comparative advantage,each person can gain from trade but total production in the economy is unchanged.

Accepted Answer

A) True 
 B)False

Question 2

Assume for the United States that the opportunity cost of each airplane is 100 cars.Then which of these pairs of points could be on the United States' production possibilities frontier?

Accepted Answer

A)  (200 airplanes, 5,000 cars)  and (150 airplanes, 4,000 cars) 
B)  (200 airplanes, 10,000 cars)  and (150 airplanes, 20,000 cars) 
C)  (300 airplanes, 15,000 cars)  and (200 airplanes, 25,000 cars) 
D)  (300 airplanes, 25,000 cars)  and (200 airplanes, 40,000 cars) E) A) and B)
F) B) and C)

Question 3

If labor in Mexico is less productive than labor in the United States in all areas of production,

Accepted Answer

A)  neither nation can benefit from trade.
B)  Mexico can benefit from trade but the United States cannot.
C)  the United States will have a comparative advantage relative to Mexico in the production of all goods.
D)  both Mexico and the United States still can benefit from trade.E) A) and D)
F) B) and C)

Question 4

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,and each country specializes according to the principle of comparative advantage.If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year,then each country's maximum consumption of new radios and televisions per year will be

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 it cannot benefit by trading with Radioland.E) B) and D)
F) B) and C)

Question 5

If he devotes all of his available resources to cantaloupe production,a farmer can produce 120 cantaloupes.If he sacrifices 1.5 watermelons for each cantaloupe that he produces,it follows that

Accepted Answer

A)  if he devotes all of his available resources to watermelon production he can produce 80 watermelons.
B)  he cannot have a comparative advantage over other farmers in producing cantaloupes.
C)  his opportunity cost of one watermelon is 2/3 of a cantaloupe.
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 6

These figures illustrate the production possibilities available to Barney and Betty with 8 hours of labor in their baker
Figure 3-4
 
-Refer to Figure 3-4.Initially,Barney is spending one-half of his time making pies and the other one-half of his time making bread,and Betty is doing the same.Relative to this initial situation,Barney and Betty could specialize according to the principle of comparative advantage,and both could benefit from this new arrangement,provided they agree that one loaf of bread will trade for somewhere between

Accepted Answer

A)  1/2 pie and 3/4 pie.
B)  3/4 pie and 1 pie.
C)  3/4 pie and 2 pies.
D)  1 pie and 1 1/2 pies.E) B) and D)
F) C) and D)

Question 7

Figure 3-1
 
-Refer to Figure 3-1.Suppose Paul must work 2 hours to produce each bushel of corn.Then Paul's production possibilities frontier is based on how many hours of work?

Accepted Answer

A)  0.2 hours
B)  5 hours
C)  10 hours
D)  20 hoursE) C) and D)
F) None of the above

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The fact that economists are generally united in their support of free trade is traceable to

Accepted Answer

A)  the principle of absolute advantage.
B)  the arguments made by Adam Smith and David Ricardo.
C)  the decline in the power of labor unions during the 20ᵗʰ century.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 10

Figure 3-3
 
-Refer to Figure 3-3.Fred would incur an opportunity cost of 3 ballet slippers if he

Accepted Answer

A)  increased his production of tap shoes by 4.
B)  increased his production of tap shoes by 5.
C)  decreased his production of tap shoes by 4.
D)  increased the time he spends on the two activities from 40 hours to 50 hours.E) C) and D)
F) A) and C)

Question 11

For two individuals who engage in the same two productive activities,it is impossible for one of the two individuals to

Accepted Answer

A)  have a comparative advantage in both activities.
B)  have an absolute advantage in both activities.
C)  be more productive per unit of time in both activities.
D)  All of the above are correct.E) A) and D)
F) A) and B)

Question 12

Adam Smith developed the theory of comparative advantage as we know it today.

Accepted Answer

A) True 
 B)False

Question 13

People generally choose to depend upon others for goods and services.Economists view this interdependence as

Accepted Answer

A)  a good thing, since it fosters friendships and bonds that otherwise would never develop.
B)  a good thing, since it allows people to consume more goods and services than they would otherwise be able to consume.
C)  a bad thing, since self-sufficiency may become necessary in the future.
D)  a bad thing, since interdependence reduces people's self-esteem and causes various social problems.E) A) and C)
F) B) and D)

Question 14

Figure 3-1
 
-Refer to Figure 3-1.Assume Cliff and Paul were both producing wheat and corn,and each person was dividing his time equally between the two.Then each decides to specialize in the product in which he has a comparative advantage.As a result of this change,total production of corn would

Accepted Answer

A)  increase by 1 bushel.
B)  increase by 3 bushels.
C)  increase by 5 bushels.
D)  decrease by 2 bushels.E) B) and C)
F) All of the above

Question 15

The principle of comparative advantage as we know it today was developed by

Accepted Answer

A)  Aristotle.
B)  David Ricardo.
C)  John Maynard Keynes.
D)  Adam Smith.E) B) and C)
F) A) and D)

Question 16

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.E) C) and D)
F) None of the above

Question 17

Figure 3-5 The graph below represents the various combinations of cars and corn that Country A could produce in a given month. (On the vertical axis, corn is measured in bushels.) 
 
-Refer to Figure 3-5.Suppose Country B is willing to trade 40 bushels of corn to Country A for each car that Country A produces and sends to Country B.Which of the following combinations of cars and corn could Country A then consume,assuming Country A specializes in car production?

Accepted Answer

A)  2 cars and 240 bushels of corn
B)  3 cars and 220 bushels of corn
C)  4 cars and 200 bushels of corn
D)  5 cars and 140 bushels of cornE) All of the above
F) B) and C)

Question 18

Two individuals engage in the same two productive activities.In which of the following circumstances would neither individual have a comparative advantage in either activity?

Accepted Answer

A)  One individual's production possibilities frontier is steeper than the other individual's production possibilities frontier.
B)  One individual is faster at both activities than the other individual.
C)  One individual's opportunity costs are the same as the other individual's opportunity costs.
D)  None of the above is correct; one of the two individuals always will have a comparative advantage in at least one of the two activities.E) A) and B)
F) B) and C)

Question 19

It takes Russell 6 hours to produce a bushel of corn and 2 hours to wash and polish a car.It takes Wilma 6 hours to produce a bushel of corn and 1 hour to wash and polish a car.Wilma and Russell cannot gain from specialization and trade,since it takes each of them 6 hours to produce 1 bushel of corn.

Accepted Answer

A) True 
 B)False

Question 20

By definition,exports are

Accepted Answer

A)  a limit placed on the quantity of goods brought into a country.
B)  opportunity benefits (as opposed to opportunity costs) .
C)  goods produced abroad and sold domestically.
D)  goods produced domestically and sold abroad.E) All of the above
F) B) and D)

Exam 3: Interdependence and the Gains From Trade

Adam Smith developed the theory of comparative advantage as we know it today.

Correct Answer
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Correct Answer
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By definition,exports are

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

Correct Answer
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Correct Answer
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If labor in Mexico is less productive than labor in the United States in all areas of production,

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

Correct Answer
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For two individuals who engage in the same two productive activities,it is impossible for one of the two individuals to

Correct Answer
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The principle of comparative advantage as we know it today was developed by

Correct Answer
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Correct Answer
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Correct Answer
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Figure 3-3 -Refer to Figure 3-3.Fred would incur an opportunity cost of 3 ballet slippers if he

Correct Answer
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Figure 3-1 -Refer to Figure 3-1.Suppose Paul must work 2 hours to produce each bushel of corn.Then Paul's production possibilities frontier is based on how many hours of work?

Correct Answer
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If he devotes all of his available resources to cantaloupe production,a farmer can produce 120 cantaloupes.If he sacrifices 1.5 watermelons for each cantaloupe that he produces,it follows that

Correct Answer
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Assume for the United States that the opportunity cost of each airplane is 100 cars.Then which of these pairs of points could be on the United States' production possibilities frontier?

Correct Answer
verified

Two individuals engage in the same two productive activities.In which of the following circumstances would neither individual have a comparative advantage in either activity?

Correct Answer
verified

The fact that economists are generally united in their support of free trade is traceable to

Correct Answer
verified

People generally choose to depend upon others for goods and services.Economists view this interdependence as

Correct Answer
verified

When each person specializes in producing the good for which he or she has a comparative advantage,each person can gain from trade but total production in the economy is unchanged.

Correct Answer
verified

Figure 3-1 -Refer to Figure 3-1.Assume Cliff and Paul were both producing wheat and corn,and each person was dividing his time equally between the two.Then each decides to specialize in the product in which he has a comparative advantage.As a result of this change,total production of corn would

Correct Answer
verified

Exam 3: Interdependence and the Gains From Trade

Adam Smith developed the theory of comparative advantage as we know it today.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

By definition,exports are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If labor in Mexico is less productive than labor in the United States in all areas of production,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For two individuals who engage in the same two productive activities,it is impossible for one of the two individuals to

Correct AnswerverifiedShow Answer

The principle of comparative advantage as we know it today was developed by

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 3-3 -Refer to Figure 3-3.Fred would incur an opportunity cost of 3 ballet slippers if he

Correct AnswerverifiedShow Answer

Figure 3-1 -Refer to Figure 3-1.Suppose Paul must work 2 hours to produce each bushel of corn.Then Paul's production possibilities frontier is based on how many hours of work?

Correct AnswerverifiedShow Answer

If he devotes all of his available resources to cantaloupe production,a farmer can produce 120 cantaloupes.If he sacrifices 1.5 watermelons for each cantaloupe that he produces,it follows that

Correct AnswerverifiedShow Answer

Assume for the United States that the opportunity cost of each airplane is 100 cars.Then which of these pairs of points could be on the United States' production possibilities frontier?

Correct AnswerverifiedShow Answer

Two individuals engage in the same two productive activities.In which of the following circumstances would neither individual have a comparative advantage in either activity?

Correct AnswerverifiedShow Answer

The fact that economists are generally united in their support of free trade is traceable to

Correct AnswerverifiedShow Answer

People generally choose to depend upon others for goods and services.Economists view this interdependence as

Correct AnswerverifiedShow Answer

When each person specializes in producing the good for which he or she has a comparative advantage,each person can gain from trade but total production in the economy is unchanged.

Correct AnswerverifiedShow Answer

Figure 3-1 -Refer to Figure 3-1.Assume Cliff and Paul were both producing wheat and corn,and each person was dividing his time equally between the two.Then each decides to specialize in the product in which he has a comparative advantage.As a result of this change,total production of corn would

Correct AnswerverifiedShow Answer

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