Question 1

-Refer to Table 3-5. Denmark and Italy trade according to the principle of comparative advantage. If the international price of bread is 2.5 units of cheese for 1 unit of bread, what is the gain from trade to Denmark per unit of bread traded?

Accepted Answer

A)   0.5 units of cheese
B)   1.5 unit of cheese
C)   2.0 units of cheese
D)   2.5 units of cheeseE) All of the above
F) B) and D)

Question 2

-Refer to Table 3-3. How could Kevin and Amy both benefit?

Accepted Answer

A)   by Kevin specializing in blankets and Amy specializing in sweaters
B)   by Kevin specializing in neither good and Amy specializing in both goods
C)   by Kevin specializing in sweaters and Amy specializing in blankets
D)   by Kevin specializing in both goods and Amy specializing in neither goodE) C) and D)
F) A) and C)

Question 3

Differences in opportunity cost allow for gains from trade.

Accepted Answer

A) True 
 B)False

Question 4

Figure 3-1
 
-Refer to Figure 3-1. What is the opportunity cost of 1 bushel of wheat for Cliff?

Accepted Answer

A)   1/3 bushel of corn
B)   2/3 bushel of corn
C)   1 bushel of corn
D)   3/2 bushels of cornE) All of the above
F) B) and D)

Question 5

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour.
 
-Refer to Figure 3-5. If Fred and Ginger devote half of their time (20 hours)  to the production of each good, what would the total production be?

Accepted Answer

A)   7 ballet slippers and 8 tap shoes
B)   8 ballet slippers and 8 tap shoes
C)   9 ballet slippers and 6 tap shoes
D)   10 ballet slippers and 8 tap shoesE) A) and D)
F) All of the above

Question 6

-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what could Japan gain from exporting a car?

Accepted Answer

A)   a maximum of 1/6 airplane
B)   a maximum of 1/4 airplane
C)   a maximum of 1/3 airplane
D)   a maximum of 3 airplanesE) A) and B)
F) A) and C)

Question 7

What is the term that means whatever must be given up to obtain an item?

Accepted Answer

A)   efficiency
B)   externality
C)   opportunity cost
D)   equilibriumE) B) and C)
F) All of the above

Question 8

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 ice cream?

Accepted Answer

A)   1/4 kg of cones
B)   1/2 kg of cones
C)   2 kg of cones
D)   4 kg of conesE) B) and D)
F) A) and B)

Question 9

Mark is a computer company executive and earns $200 per hour managing the company and promoting its products. His daughter Regan is a high school student and earns $12 per hour helping her grandmother on the farm. Mark's computer is broken. He can repair it himself in one hour. Regan can repair it in 10 hours. Mark has a comparative advantage repairing the computer.

Accepted Answer

A) True 
 B)False

Question 10

Assume that Spain has a comparative advantage in fish and Germany has a comparative advantage in cars. What will happen if these two countries specialize and trade according to their comparative advantage?

Accepted Answer

A)   All individuals in both countries will benefit.
B)   Spain will specialize in and export cars.
C)   Germany will produce more cars than fish in the absence of trade.
D)   Germany will produce more fish than cars in the absence of trade.E) None of the above
F) A) and C)

Question 11

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

Accepted Answer

A)   9 hours of labour
B)   3 hours of labour
C)   3 kg of meat
D)   1/3kg of meatE) All of the above
F) B) and C)

Question 12

-Refer to Table 3-2. 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 goodE) B) and C)
F) A) and B)

Question 13

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

Accepted Answer

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

Question 14

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour.
 
-Refer to Figure 3-5. What does each of the two producers have an absolute advantage in?

Accepted Answer

A)   Ginger has an absolute advantage in ballet slippers, and Fred has an absolute advantage in tap shoes.
B)   Ginger has an absolute advantage in tap shoes, and Fred has an absolute advantage in ballet slippers.
C)   Ginger has an absolute advantage in neither good, and Fred has an absolute advantage in both goods.
D)   Ginger has an absolute advantage in both goods, and Fred has an absolute advantage in neither good.E) C) and D)
F) B) and D)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 10 workers in each country. No trade occurs between the two countries. Boatland produces and consumes 25 units of wheat and 125 units of fish per year, while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If trade were to occur, Boatland would trade 100 units of fish to Farmland in exchange for 100 units of wheat. If Boatland no longer grew any of its own wheat, how many units of fish could it now consume along with the 100 units of imported wheat?

Accepted Answer

A)   25 units
B)   75 units
C)   150 units
D)   250 unitsE) B) and D)
F) A) and D)

Question 17

-Refer to Table 3-3. What is the opportunity cost of one blanket for Kevin?

Accepted Answer

A)   1/5 sweater
B)   1/4 sweater
C)   1 sweater
D)   5 sweatersE) A) and D)
F) A) and B)

Question 18

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Accepted Answer

A) True 
 B)False

Question 19

What happens when countries specialize according to their comparative advantage?

Accepted Answer

A)   It is possible to increase world output of all goods.
B)   It is possible to increase world output of some goods only by reducing the output of others.
C)   One country is likely to gain from trade while others lose.
D)   All countries will lose from trade.E) A) and B)
F) A) and C)

Question 20

-Refer to Table 3-1. What does each producer have an absolute or comparative advantage in?

Accepted Answer

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

Exam 3: Interdependence and the Gains From Trade

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5. What does each of the two producers have an absolute advantage in?

Correct Answer
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-Refer to Table 3-2. How could the farmer and rancher both benefit?

Correct Answer
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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 ice cream?

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

Correct Answer
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What happens when countries specialize according to their comparative advantage?

Correct Answer
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Differences in opportunity cost allow for gains from trade.

Correct Answer
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Figure 3-1 -Refer to Figure 3-1. What is the opportunity cost of 1 bushel of wheat for Cliff?

Correct Answer
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Correct Answer
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-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what could Japan gain from exporting a car?

Correct Answer
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Assume that Spain has a comparative advantage in fish and Germany has a comparative advantage in cars. What will happen if these two countries specialize and trade according to their comparative advantage?

Correct Answer
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International trade may make some individuals in a nation better off, while other individuals are made worse off.

Correct Answer
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What is the term that means whatever must be given up to obtain an item?

Correct Answer
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-Refer to Table 3-3. What is the opportunity cost of one blanket for Kevin?

Correct Answer
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-Refer to Table 3-5. Denmark and Italy trade according to the principle of comparative advantage. If the international price of bread is 2.5 units of cheese for 1 unit of bread, what is the gain from trade to Denmark per unit of bread traded?

Correct Answer
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Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5. If Fred and Ginger devote half of their time (20 hours) to the production of each good, what would the total production be?

Correct Answer
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-Refer to Table 3-3. How could Kevin and Amy both benefit?

Correct Answer
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-Refer to Table 3-1. What does each producer have an absolute or comparative advantage in?

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

Correct Answer
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-Refer to Table 3-1. What is the opportunity cost of 1 kg of potatoes for the farmer?

Correct Answer
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Exam 3: Interdependence and the Gains From Trade

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5. What does each of the two producers have an absolute advantage in?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-Refer to Table 3-2. How could the farmer and rancher both benefit?

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 ice cream?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What happens when countries specialize according to their comparative advantage?

Correct AnswerverifiedShow Answer

Differences in opportunity cost allow for gains from trade.

Correct AnswerverifiedShow Answer

Figure 3-1 -Refer to Figure 3-1. What is the opportunity cost of 1 bushel of wheat for Cliff?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

-Refer to Table 3-5. If Canada and Japan trade based on the principle of comparative advantage, what could Japan gain from exporting a car?

Correct AnswerverifiedShow Answer

Assume that Spain has a comparative advantage in fish and Germany has a comparative advantage in cars. What will happen if these two countries specialize and trade according to their comparative advantage?

Correct AnswerverifiedShow Answer

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Correct AnswerverifiedShow Answer

What is the term that means whatever must be given up to obtain an item?

Correct AnswerverifiedShow Answer

-Refer to Table 3-3. What is the opportunity cost of one blanket for Kevin?

Correct AnswerverifiedShow Answer

-Refer to Table 3-5. Denmark and Italy trade according to the principle of comparative advantage. If the international price of bread is 2.5 units of cheese for 1 unit of bread, what is the gain from trade to Denmark per unit of bread traded?

Correct AnswerverifiedShow Answer

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5. If Fred and Ginger devote half of their time (20 hours) to the production of each good, what would the total production be?

Correct AnswerverifiedShow Answer

-Refer to Table 3-3. How could Kevin and Amy both benefit?

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-Refer to Table 3-1. What does each producer have an absolute or comparative advantage in?

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

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

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