Question 1

Which of the following statements is TRUE?

Accepted Answer

A)  Trade makes workers in high productivity countries less productive. 
B)  Trade causes workers in low-wage countries to receive an even lower wage. 
C)  Specialization and trade raise wages in both countries that are party to the trade. 
D)  Specialization and trade raise productivity but not wages. 
A)  Trade makes workers in high productivity countries less productive. 
B)  Trade causes workers in low-wage countries to receive an even lower wage. 
C)  Specialization and trade raise wages in both countries that are party to the trade. 
D)  Specialization and trade raise productivity but not wages.

Question 2

Use the following to answer questions:
Figure: PPF Mexico & United States  
-(Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one computer are:

Accepted Answer

A)  six shirts for Mexico and one shirt for the United States. 
B)  1/6 of a shirt for both Mexico and the United States. 
C)  one shirt for Mexico and 1/6 of a shirt for the United States. 
D)  six shirts for both Mexico and the United States. 
A)  six shirts for Mexico and one shirt for the United States. 
B)  1/6 of a shirt for both Mexico and the United States. 
C)  one shirt for Mexico and 1/6 of a shirt for the United States. 
D)  six shirts for both Mexico and the United States.

Question 3

Specialization and the division of knowledge decreased with the fall of the Berlin Wall and the opening of China's economy to the world.

Accepted Answer

A) True 
 B)False

Question 4

The U.S. interstate highway system probably allowed more people in small communities to become full-time interior decorators.

Accepted Answer

A) True 
 B)False

Question 5

Specializing in one's comparative advantage and trading with others will make individuals better off, but may not make countries better off.

Accepted Answer

A) True 
 B)False

Question 6

If each of us had to grow all of our own food:

Accepted Answer

A)  civilization would collapse and billions of people would starve. 
B)  we would have more time for other pursuits. 
C)  people would be richer since they would no longer have to spend money on groceries. 
D)  the total amount of knowledge in society would increase since everyone would have to learn about farming. 
A)  civilization would collapse and billions of people would starve. 
B)  we would have more time for other pursuits. 
C)  people would be richer since they would no longer have to spend money on groceries. 
D)  the total amount of knowledge in society would increase since everyone would have to learn about farming.

Question 7

Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:

Accepted Answer

A)  France should specialize in producing phones and import computers from Sweden. 
B)  France should specialize in producing computers and import phones from Sweden. 
C)  France should produce both phones and computers, and import nothing from Sweden. 
D)  France should import both phones and computers from Sweden. 
A)  France should specialize in producing phones and import computers from Sweden. 
B)  France should specialize in producing computers and import phones from Sweden. 
C)  France should produce both phones and computers, and import nothing from Sweden. 
D)  France should import both phones and computers from Sweden.

Question 8

The relationship between trade and specialization is best characterized as follows:

Accepted Answer

A)  Trade decreases specialization, which in turn increases the demand for trade. 
B)  Trade decreases specialization, which in turn decreases the demand for trade. 
C)  Trade increases specialization, which in turn increases the demand for trade. 
D)  Trade increases specialization, which in turn decreases the demand for trade. 
A)  Trade decreases specialization, which in turn increases the demand for trade. 
B)  Trade decreases specialization, which in turn decreases the demand for trade. 
C)  Trade increases specialization, which in turn increases the demand for trade. 
D)  Trade increases specialization, which in turn decreases the demand for trade.

Question 9

Anita is a wonderful baker and can bake 10 cakes in a day, but then has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John can make equally delicious cakes and cookies but can only make seven cakes or 100 cookies in a day. Based on this information, which of the following statements is true?

Accepted Answer

A)  Anita has the comparative advantage in the production of cakes. 
B)  John has the comparative advantage in the production of cakes. 
C)  John has the absolute advantage in the production of cookies. 
D)  Anita has the comparative advantage in the production of both cakes and cookies. 
A)  Anita has the comparative advantage in the production of cakes. 
B)  John has the comparative advantage in the production of cakes. 
C)  John has the absolute advantage in the production of cookies. 
D)  Anita has the comparative advantage in the production of both cakes and cookies.

Question 10

Use the following to answer questions:
Figure: Steel and Lumber  
-(Figure: Steel and Lumber) In the PPF diagram, the United States has a comparative advantage in ______ and an absolute advantage in ______.

Accepted Answer

A)  both goods; both goods 
B)  steel; lumber 
C)  steel; both goods 
D)  lumber; steel 
A)  both goods; both goods 
B)  steel; lumber 
C)  steel; both goods 
D)  lumber; steel

Question 11

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?

Accepted Answer

A)  One prefers to hunt while the other prefers to paddle the boat; this is an example of diverse preferences. 
B)  One learns to be very good at paddling and one learns to be very good at hunting; this is an example of specialization and division of knowledge. 
C)  The paddler is stronger than the hunter so the paddler sacrifices a lot by hunting; this is an example of comparative advantage. 
D)  There is no trade in this example since no goods are being exchanged. 
A)  One prefers to hunt while the other prefers to paddle the boat; this is an example of diverse preferences. 
B)  One learns to be very good at paddling and one learns to be very good at hunting; this is an example of specialization and division of knowledge. 
C)  The paddler is stronger than the hunter so the paddler sacrifices a lot by hunting; this is an example of comparative advantage. 
D)  There is no trade in this example since no goods are being exchanged.

Question 12

Your professor hires a teaching assistant to grade student assignments even though he may do the task faster and perhaps more accurately. How can you explain this behavior using the theory of comparative advantage?

Accepted Answer

According to the theory of comparative a

Question 13

To benefit the most from trade, a person should:

Accepted Answer

A)  specialize in an activity for which she has an absolute advantage. 
B)  specialize in an activity for which she has a comparative advantage. 
C)  do everything she possibly can. 
D)  do as little as possible. 
A)  specialize in an activity for which she has an absolute advantage. 
B)  specialize in an activity for which she has a comparative advantage. 
C)  do everything she possibly can. 
D)  do as little as possible.

Question 14

Briefly describe a few activities that a typical student might do on any given day that reflect the effects of globalization.

Accepted Answer

This answer would of course be personali

Question 15

Which of the following statements is TRUE?
I. Compared with a modern economy, the division of knowledge is greater in a primitive economy because every family is self-sufficient: growing their own food, making their own clothes, and constructing their own shelter.
II. Nobody understands the entire process of producing even the simplest products, like a lead pencil, in a modern economy.
III. The collapse of communism and the opening of the Chinese economy to the rest of the world have increased the division of knowledge, leading to increased world output.

Accepted Answer

A)  I only 
B)  III only 
C)  II and III only 
D)  I, II, and III 
A)  I only 
B)  III only 
C)  II and III only 
D)  I, II, and III

Question 16

Involuntary trades increase value in the same way voluntary trades do.

Accepted Answer

A) True 
 B)False

Question 17

Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. According to this scenario, which of the following outcomes will benefit both Jack and Jill the most?

Accepted Answer

A)  Both Jack and Jill specialize in decorating ice-cream cakes. 
B)  Both Jack and Jill specialize in decorating wedding cakes. 
C)  Jill specializes in decorating ice-cream cakes and Jack specializes in decorating wedding cakes. 
D)  Jill specializes in decorating wedding cakes and Jack specializes in decorating ice-cream cakes. 
A)  Both Jack and Jill specialize in decorating ice-cream cakes. 
B)  Both Jack and Jill specialize in decorating wedding cakes. 
C)  Jill specializes in decorating ice-cream cakes and Jack specializes in decorating wedding cakes. 
D)  Jill specializes in decorating wedding cakes and Jack specializes in decorating ice-cream cakes.

Question 18

The principles of comparative advantage, specialization, and trade apply to:
I. individuals.
II. communities.
III. regions.
IV. nations.

Accepted Answer

A)  I and II only 
B)  I, II, and III only 
C)  II, III, and IV only 
D)  I, II, III, and IV 
A)  I and II only 
B)  I, II, and III only 
C)  II, III, and IV only 
D)  I, II, III, and IV

Question 19

Comparative advantage is determined by which of the following?

Accepted Answer

A)  efficiency 
B)  bargaining power 
C)  opportunity cost 
D)  productivity 
A)  efficiency 
B)  bargaining power 
C)  opportunity cost 
D)  productivity

Question 20

In a two-country world of Japan and South Korea, suppose Japan can produce 600 radios or 300 TV sets in one day with all its available resources, while South Korea can produce 100 radios or 200 TV sets in one day with all its available resources. According to the theory of comparative advantage, what would be the possible gain in this world if the two countries specialize and trade with each other?

Accepted Answer

For Japan, the opportunity cost of produ

Exam 2: The Power of Trade and Comparative

Which of the following statements is TRUE?

Use the following to answer questions: Figure: PPF Mexico & United States -(Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one computer are:

Specialization and the division of knowledge decreased with the fall of the Berlin Wall and the opening of China's economy to the world.

The U.S. interstate highway system probably allowed more people in small communities to become full-time interior decorators.

Specializing in one's comparative advantage and trading with others will make individuals better off, but may not make countries better off.

If each of us had to grow all of our own food:

Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:

The relationship between trade and specialization is best characterized as follows:

Use the following to answer questions: Figure: Steel and Lumber -(Figure: Steel and Lumber) In the PPF diagram, the United States has a comparative advantage in ______ and an absolute advantage in ______.

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?

Your professor hires a teaching assistant to grade student assignments even though he may do the task faster and perhaps more accurately. How can you explain this behavior using the theory of comparative advantage?

To benefit the most from trade, a person should:

Briefly describe a few activities that a typical student might do on any given day that reflect the effects of globalization.

Involuntary trades increase value in the same way voluntary trades do.

Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. According to this scenario, which of the following outcomes will benefit both Jack and Jill the most?

The principles of comparative advantage, specialization, and trade apply to: I. individuals. II. communities. III. regions. IV. nations.

Comparative advantage is determined by which of the following?

The Big Ideas

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

Use the following to answer questions: Figure: Steel and Lumber -(Figure: Steel and Lumber) In the PPF diagram, the United States has a comparative advantage in and an absolute advantage in .