Question 1

If a nation has a comparative advantage in the production of a good it

Accepted Answer

A)   can produce that good at a lower opportunity cost than its trading partner.
B)   can benefit by restricting imports of that good.
C)   can produce that good using fewer resources than its trading partner.
D)   must be the only country with the ability to produce that good.E) A) and D)
F) All of the above

Question 2

If a nation has an absolute advantage in the production of a good it

Accepted Answer

A)   can benefit by restricting imports of that good.
B)   will specialise in the production of that good and export it.
C)   can produce that good using fewer resources than its trading partner.
D)   can produce that good at a lower opportunity cost than its trading partner.E) A) and B)
F) A) and C)

Question 3

Exhibit 2
 
-Refer to Exhibit 2. The gains from trade correspond to the

Accepted Answer

A)   Area B.
B)   Area D.
C)   Area C.
D)   Area B + D.
E)   Area A.F) None of the above
G) D) and E)

Question 4

Exhibit 1
 
-Refer to Exhibit 1. As we move from point A to point D,

Accepted Answer

A)   the opportunity cost of buns in terms of biscuits falls.
B)   the opportunity cost of buns in terms of biscuits rises.
C)   the opportunity cost of buns in terms of biscuits is constant.
D)   the economy becomes less efficient.
E)   the economy becomes more efficient.F) A) and C)
G) C) and E)

Question 5

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the opportunity cost of 1 watch is

Accepted Answer

A)   1/4 of a ring.
B)   3 rings.
C)   4 rings.
D)   12 rings.
E)   1/3 of a ring.F) B) and D)
G) D) and E)

Question 6

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia.
   Fond  Electranics  South Africa 205 Narmibia 82\begin{array} { | l | c | c | } \hline & 	ext { Fond } & 	ext { Electranics } \\hline 	ext { South Africa } & 20 & 5 \\hline 	ext { Narmibia } & 8 & 2 \\hline\end{array} South Africa  Narmibia ​ Fond 208​ Electranics 52​​ 
-Refer to Table 1. Prices of electronics can be stated in terms of units of food. What is the range of prices of electronics for which both countries could gain from trade? The price must be greater than:

Accepted Answer

A)   1/5 of a unit of food but less than 1/4 of a unit of food.
B)   4 units of food but less than 5 units of food.
C)   1/4 of a unit of food but less than 1/2 of a unit of food.
D)   2 units of food but less than 4 units of food. E) All of the above
F) None of the above

Question 7

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia.
   Fond  Electranics  South Africa 205 Narmibia 82\begin{array} { | l | c | c | } \hline & 	ext { Fond } & 	ext { Electranics } \\hline 	ext { South Africa } & 20 & 5 \\hline 	ext { Narmibia } & 8 & 2 \\hline\end{array} South Africa  Narmibia ​ Fond 208​ Electranics 52​​ 
-Refer to Table 1. Namibia should

Accepted Answer

A)   specialise in electronics production, export electronics, and import food.
B)   produce neither good because it has an absolute disadvantage in the production of both goods.
C)   produce both goods because neither country has a comparative advantage.
D)   specialise in food production, export food, and import electronics. E) A) and D)
F) A) and C)

Question 8

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is R50. Jacques can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is R20. Will both Julia and Jacques be better off if she pays him R45 per meal to fix her meals? Explain.

Accepted Answer

Since Julia's opportunity cost...

Question 9

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia.
   Fond  Electranics  South Africa 205 Narmibia 82\begin{array} { | l | c | c | } \hline & 	ext { Fond } & 	ext { Electranics } \\hline 	ext { South Africa } & 20 & 5 \\hline 	ext { Narmibia } & 8 & 2 \\hline\end{array} South Africa  Narmibia ​ Fond 208​ Electranics 52​​ 
-Refer to Table 1. Which of the following statements about absolute advantage is true?

Accepted Answer

A)   South Africa has an absolute advantage in the production of food while Namibia has an absolute advantage in the production of electronics.
B)   Namibia has an absolute advantage in the production of food while South Africa has an absolute advantage in the production of electronics.
C)   South Africa has an absolute advantage in the production of both food and electronics.
D)   Namibia has an absolute advantage in the production of both food and electronics. E) A) and B)
F) B) and D)

Question 10

Comparative advantage is a comparison based on opportunity cost.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about a tariff is true?

Accepted Answer

A)   A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and increases total surplus.
B)   A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and reduces total surplus.
C)   A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus.
D)   A tariff increases consumer surplus, decreases producer surplus, increases revenue to the government, and increases total surplus.E) None of the above
F) All of the above

Question 12

Points outside the production possibilities frontier are attainable but inefficient.

Accepted Answer

A) True 
 B)False

Question 13

How does an import quota differ from an equivalent tariff?

Accepted Answer

Both the import quota and the tariff rai...

Question 14

If trade benefits one country, its trading partner must be worse off due to trade.

Accepted Answer

A) True 
 B)False

Question 15

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Accepted Answer

A)   If Germany has an absolute advantage in the production of food, then Spain must have an absolute advantage in the production of clothing.
B)   None of these answers.
C)   If Germany has a comparative advantage in the production of food, Spain might also have a comparative advantage in the production of food.
D)   If Germany has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing.
E)   If Germany has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing.F) B) and D)
G) A) and D)

Question 16

Which of the following is not employed as an argument in support of trade restrictions?

Accepted Answer

A)   Free trade harms the national security if vital products are imported.
B)   Free trade is harmful to importing countries if foreign countries subsidise their exporting industries.
C)   Free trade destroys domestic jobs.
D)   Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus.
E)   Free trade harms infant industries in an importing country.F) C) and E)
G) B) and D)

Question 17

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

Accepted Answer

A) True 
 B)False

Question 18

What are the arguments in favour of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

Accepted Answer

Arguments include jobs, national securit...

Question 19

Which of the following statements about trade is true?

Accepted Answer

A)   Unrestricted international trade benefits every person in a country equally.
B)   Trade can benefit everyone in society because it allows people to specialise in activities in which they have a comparative advantage.
C)   People that are skilled at all activities cannot benefit from trade because they do not have an opportunity cost in production.
D)   Trade can benefit everyone in society because it allows people to specialise in activities in which they have an absolute advantage.E) A) and B)
F) A) and C)

Question 20

Exhibit 1
 
-Refer to Exhibit 1. Point F represents a combination of production that

Accepted Answer

A)   is a more equitable output level of both biscuits and buns.
B)   can be reached if we reduce the production of buns by 20 units.
C)   can be reached if there is a sufficient advance in technology.
D)   is inefficient because there are unemployed resources.E) All of the above
F) A) and B)

Exam 19: Interdependence and the Gains From Trade

What are the arguments in favour of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

Correct Answer
verified
Arguments include jobs, national securit...
View Answer

Correct Answer
verified

Exhibit 2 -Refer to Exhibit 2. The gains from trade correspond to the

Correct Answer
verified

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

Correct Answer
verified

Which of the following is not employed as an argument in support of trade restrictions?

Correct Answer
verified

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Correct Answer
verified

If a nation has a comparative advantage in the production of a good it

Correct Answer
verified

If trade benefits one country, its trading partner must be worse off due to trade.

Correct Answer
verified

Correct Answer
verified

Points outside the production possibilities frontier are attainable but inefficient.

Correct Answer
verified

How does an import quota differ from an equivalent tariff?

Correct Answer
verified
Both the import quota and the tariff rai...
View Answer

Comparative advantage is a comparison based on opportunity cost.

Correct Answer
verified

Correct Answer
verified

Exhibit 1 -Refer to Exhibit 1. Point F represents a combination of production that

Correct Answer
verified

Which of the following statements about trade is true?

Correct Answer
verified

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is R50. Jacques can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is R20. Will both Julia and Jacques be better off if she pays him R45 per meal to fix her meals? Explain.

Correct Answer
verified
Since Julia's opportunity cost...
View Answer

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the opportunity cost of 1 watch is

Correct Answer
verified

Exhibit 1 -Refer to Exhibit 1. As we move from point A to point D,

Correct Answer
verified

If a nation has an absolute advantage in the production of a good it

Correct Answer
verified

Which of the following statements about a tariff is true?

Correct Answer
verified

Exam 19: Interdependence and the Gains From Trade

What are the arguments in favour of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain.

Correct AnswerverifiedArguments include jobs, national securit...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Exhibit 2 -Refer to Exhibit 2. The gains from trade correspond to the

Correct AnswerverifiedShow Answer

If an economy is operating on its production possibilities frontier, it must produce less of one good if it produces more of another.

Correct AnswerverifiedShow Answer

Which of the following is not employed as an argument in support of trade restrictions?

Correct AnswerverifiedShow Answer

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

Correct AnswerverifiedShow Answer

If a nation has a comparative advantage in the production of a good it

Correct AnswerverifiedShow Answer

If trade benefits one country, its trading partner must be worse off due to trade.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Points outside the production possibilities frontier are attainable but inefficient.

Correct AnswerverifiedShow Answer

How does an import quota differ from an equivalent tariff?

Correct AnswerverifiedBoth the import quota and the tariff rai...View AnswerShow Answer

Comparative advantage is a comparison based on opportunity cost.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 1 -Refer to Exhibit 1. Point F represents a combination of production that

Correct AnswerverifiedShow Answer

Which of the following statements about trade is true?

Correct AnswerverifiedShow Answer

Julia can fix a meal in 1 hour, and her opportunity cost of one hour is R50. Jacques can fix the same kind of meal in 2 hours, and his opportunity cost of one hour is R20. Will both Julia and Jacques be better off if she pays him R45 per meal to fix her meals? Explain.

Correct AnswerverifiedSince Julia's opportunity cost...View AnswerShow Answer

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the opportunity cost of 1 watch is

Correct AnswerverifiedShow Answer

Exhibit 1 -Refer to Exhibit 1. As we move from point A to point D,

Correct AnswerverifiedShow Answer

If a nation has an absolute advantage in the production of a good it

Correct AnswerverifiedShow Answer

Which of the following statements about a tariff is true?

Correct AnswerverifiedShow Answer

Correct Answer
verified
Arguments include jobs, national securit...
View 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
Both the import quota and the tariff rai...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Since Julia's opportunity cost...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified