Question 1

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

Accepted Answer

A)   1/4 hour of labour
B)   1 hour of labour
C)   1/4 kilograms of potatoes
D)   4 kilogram of potatoesE) A) and B)
F) A) and C)

Question 2

What did Adam Smith believe about trade?

Accepted Answer

A)   that trade would hurt the British people
B)   that trade with other countries was not necessary
C)   that trade should be based on comparative advantage
D)   that people are better off if they specialize in what they can do bestE) None of the above
F) B) and D)

Question 3

What are exports?

Accepted Answer

A)   limits placed on the quantity of goods brought into a country
B)   goods produced abroad and sold domestically
C)   a country's ability to produce a good
D)   goods produced domestically and sold abroadE) A) and D)
F) B) and C)

Question 4

Trade is based on absolute advantage.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)   1 hours of labour
B)   4 hours of labour
C)   1/4 kilogram of meat
D)   4 kilograms of meatE) C) and D)
F) A) and B)

Question 6

How does trade benefit the two parties involved?

Accepted Answer

A)   Trade benefits both parties, but not always equally.
B)   Trade benefits the seller more than the buyer.
C)   Trade benefits the buyer more than the seller.
D)   Trade benefits both parties equally.E) A) and B)
F) All of the above

Question 7

What should a country do if it has a comparative advantage in a product?

Accepted Answer

A)   It should import that product.
B)   It should export that product.
C)   It should keep the product for domestic use since it is relatively inexpensive to produce.
D)   It should lower the costs of production until realizing an absolute advantage.E) A) and B)
F) A) and C)

Question 8

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

Accepted Answer

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

Question 9

Figure 3-1 
-Refer to Figure 3-1. If Paul divides his time equally between corn and wheat, what will he be able to produce?

Accepted Answer

A)   2 bushels of wheat and 2 bushels of corn
B)   3 bushels of wheat and 3 bushels of corn
C)   4 bushels of wheat and 5 bushels of corn
D)   4 bushels of wheat and 6 bushels of cornE) B) and C)
F) A) and D)

Question 10

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 50 bushels of corn and 500 bushels of oats. Combined output for the two countries would therefore be 450 bushels of corn and 600 bushels of oats. If the two countries do trade, each will completely specialize in producing the crop for which it has a comparative advantage. If trade occurs, by what amount will the combined output for the two countries increase?

Accepted Answer

A)   200 bushels of corn and 200 bushels of oats
B)   350 bushels of corn and 400 bushels of oats
C)   400 bushels of corn and 500 bushels of oats
D)   800 bushels of corn and 1000 bushels of oatsE) A) and C)
F) A) and D)

Question 11

Figure 3-2 
-Refer to Figure 3-2. Assume that Cliff and Paul were both producing wheat and corn, and both were dividing their time equally between the two. Then they decide to specialize in the product for which they have a comparative advantage and trade 3 bushels of wheat for 3 bushels of corn. What would Cliff now be able to consume?

Accepted Answer

A)   3 bushels of wheat and 3 bushels of corn
B)   3 bushels of wheat and 5 bushels of corn
C)   4 bushels of wheat and 3 bushels of corn
D)   5 bushels of wheat and 3 bushels of cornE) A) and B)
F) B) and D)

Question 12

When will a production possibilities frontier be linear and not bowed out?

Accepted Answer

A)   if no tradeoffs exist
B)   if the tradeoff between the two goods is always at a constant rate
C)   if unemployment is zero
D)   if resources are allocated efficientlyE) All of the above
F) A) and B)

Question 13

-Refer to the table. What is the opportunity cost of one sled for Summer?

Accepted Answer

A)   1/3 beach ball
B)   1 beach ball
C)   4/3 beach balls
D)   3 beach ballsE) A) and D)
F) B) and D)

Question 14

-Refer to Table 3-6. Which country has an absolute advantage in each product?

Accepted Answer

A)   Denmark has an absolute advantage in bread, and Italy has an absolute advantage in cheese.
B)   Denmark has an absolute advantage in cheese, and Italy has an absolute advantage in bread.
C)   Denmark has an absolute advantage in neither good, and Italy has an absolute advantage in both goods.
D)   Denmark has an absolute advantage in both goods, and Italy has an absolute advantage in neither good.E) B) and D)
F) None of the above

Question 15

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 breadE) A) and D)
F) All of the above

Question 16

Figure 3-3
Ice cream and cones are measured in kilograms. 
-Refer to Figure 3-3. For Ben, what is the opportunity cost of 1 kg of cones?

Accepted Answer

A)   1/4 kg of ice cream
B)   1/2 kg of ice cream
C)   2 kg of ice cream
D)   4 kg of ice creamE) B) and C)
F) A) and B)

Question 17

What is the term for a good that is produced abroad and sold domestically?

Accepted Answer

A)   a quota
B)   a tariff
C)   an import
D)   an exportE) None of the above
F) A) and B)

Question 18

-Refer to Table 3-6. 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 goodsE) A) and C)
F) B) and D)

Question 19

Figure 3-1 
-Refer to Figure 3-1. Assume that Cliff and Paul were both producing wheat and corn, and each was dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. What would happen to the total production of corn?

Accepted Answer

A)   It would increase by 1 bushel.
B)   It would increase by 3 bushels.
C)   It would increase by 5 bushels.
D)   It would increase by 7 bushels.E) B) and D)
F) B) and C)

Question 20

When can a country's consumption possibilities frontier be outside its production possibilities frontier?

Accepted Answer

A)   if additional resources become available
B)   if there is an increase in the level of technology
C)   if the country engages in trade
D)   if resources are adaptable.E) A) and B)
F) All of the above

Exam 3: Interdependence and the Gains From Trade

What did Adam Smith believe about trade?

Correct Answer
verified

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

Correct Answer
verified

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?

Correct Answer
verified

When will a production possibilities frontier be linear and not bowed out?

Correct Answer
verified

Figure 3-1 -Refer to Figure 3-1. Assume that Cliff and Paul were both producing wheat and corn, and each was dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. What would happen to the total production of corn?

Correct Answer
verified

Correct Answer
verified

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3. For Ben, what is the opportunity cost of 1 kg of cones?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

-Refer to the table. What is the opportunity cost of one sled for Summer?

Correct Answer
verified

How does trade benefit the two parties involved?

Correct Answer
verified

What should a country do if it has a comparative advantage in a product?

Correct Answer
verified

What is the term for a good that is produced abroad and sold domestically?

Correct Answer
verified

-Refer to Table 3-6. How could Denmark and Italy benefit?

Correct Answer
verified

When can a country's consumption possibilities frontier be outside its production possibilities frontier?

Correct Answer
verified

Correct Answer
verified

Trade is based on absolute advantage.

Correct Answer
verified

-Refer to Table 3-6. Which country has an absolute advantage in each product?

Correct Answer
verified

Figure 3-1 -Refer to Figure 3-1. If Paul divides his time equally between corn and wheat, what will he be able to produce?

Correct Answer
verified

What are exports?

Correct Answer
verified

Exam 3: Interdependence and the Gains From Trade

What did Adam Smith believe about trade?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

When will a production possibilities frontier be linear and not bowed out?

Correct AnswerverifiedShow Answer

Figure 3-1 -Refer to Figure 3-1. Assume that Cliff and Paul were both producing wheat and corn, and each was dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. What would happen to the total production of corn?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3. For Ben, what is the opportunity cost of 1 kg of cones?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

-Refer to the table. What is the opportunity cost of one sled for Summer?

Correct AnswerverifiedShow Answer

How does trade benefit the two parties involved?

Correct AnswerverifiedShow Answer

What should a country do if it has a comparative advantage in a product?

Correct AnswerverifiedShow Answer

What is the term for a good that is produced abroad and sold domestically?

Correct AnswerverifiedShow Answer

-Refer to Table 3-6. How could Denmark and Italy benefit?

Correct AnswerverifiedShow Answer

When can a country's consumption possibilities frontier be outside its production possibilities frontier?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Trade is based on absolute advantage.

Correct AnswerverifiedShow Answer

-Refer to Table 3-6. Which country has an absolute advantage in each product?

Correct AnswerverifiedShow Answer

Figure 3-1 -Refer to Figure 3-1. If Paul divides his time equally between corn and wheat, what will he be able to produce?

Correct AnswerverifiedShow Answer

What are exports?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified