Question 1

Trade barriers like the Berlin Wall:

Accepted Answer

A)  increased the number of scientists and engineers. 
B)  added billions of minds to the global division of knowledge. 
C)  decreased innovation and global cooperation. 
D)  prevented restrictive monopolistic practices. 
A)  increased the number of scientists and engineers. 
B)  added billions of minds to the global division of knowledge. 
C)  decreased innovation and global cooperation. 
D)  prevented restrictive monopolistic practices.

Question 2

The basic idea of trade is to buy the things you could only make at a high opportunity cost, and sell the things you can make at a low opportunity cost.

Accepted Answer

A) True 
 B)False

Question 3

If Joyce can gather 15 logs a day or catch 10 fish a day and Percy can gather five logs a day or catch five fish a day, then Percy has a comparative advantage in gathering fish.

Accepted Answer

A) True 
 B)False

Question 4

The production possibilities frontier shows:

Accepted Answer

A)  the combinations of outputs a country can produce given its resources and productivity. 
B)  the combinations of inputs that a country has given its outputs and productivity. 
C)  the combinations of outputs and resources that a country possesses given its productivity. 
D)  the maximum level of a country's productivity given its resources and outputs. 
A)  the combinations of outputs a country can produce given its resources and productivity. 
B)  the combinations of inputs that a country has given its outputs and productivity. 
C)  the combinations of outputs and resources that a country possesses given its productivity. 
D)  the maximum level of a country's productivity given its resources and outputs.

Question 5

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Specialization and trade between them can benefit:

Accepted Answer

A)  both Maria and Jorge. 
B)  Maria, but not Jorge. 
C)  Jorge, but not Maria. 
D)  neither Maria nor Jorge. 
A)  both Maria and Jorge. 
B)  Maria, but not Jorge. 
C)  Jorge, but not Maria. 
D)  neither Maria nor Jorge.

Question 6

Conan O'Brien hosts the Conan show and Andy Richter, his sidekick, writes for it. Conan needs 4 hours to rehearse and host a good show. It takes Andy 10 hours to do the same. Conan writes one usable joke in an hour, but Andy needs 2 hours to do the same. If each party produces according to his comparative advantage:

Accepted Answer

A)  Andy will host and Conan will write. 
B)  Andy will host and Andy will write. 
C)  Conan will host and Conan will write. 
D)  Conan will host and Andy will write. 
A)  Andy will host and Conan will write. 
B)  Andy will host and Andy will write. 
C)  Conan will host and Conan will write. 
D)  Conan will host and Andy will write.

Question 7

Trade increases productivity when production is carried out by the person/group with the comparative advantage.

Accepted Answer

A) True 
 B)False

Question 8

Employing comparative advantage increases the total satisfaction with what's produced, but not the total amount of what's produced.

Accepted Answer

A) True 
 B)False

Question 9

Comparative advantage occurs when an individual's opportunity cost for producing the same good or service is lower than that of another individual.

Accepted Answer

A) True 
 B)False

Question 10

Martha Stewart does not do her own ironing because she:

Accepted Answer

A)  is not very good at ironing. 
B)  has an absolute advantage in ironing. 
C)  has a comparative advantage in something else. 
D)  has a comparative advantage in ironing. 
A)  is not very good at ironing. 
B)  has an absolute advantage in ironing. 
C)  has a comparative advantage in something else. 
D)  has a comparative advantage in ironing.

Question 11

A country has a comparative advantage in producing a good when it produces that good:

Accepted Answer

A)  at a lower opportunity cost than another country. 
B)  at a higher opportunity cost than another country. 
C)  in greater quantity than another country. 
D)  with fewer inputs than another country. 
A)  at a lower opportunity cost than another country. 
B)  at a higher opportunity cost than another country. 
C)  in greater quantity than another country. 
D)  with fewer inputs than another country.

Question 12

Trade causes wages in countries with high productivity to increase and wages in countries with low productivity to decrease.

Accepted Answer

A) True 
 B)False

Question 13

When using a production possibilities frontier (PPF), a trade-off is demonstrated by:

Accepted Answer

A)  an outward shift of the PPF. 
B)  an inward shift of the PPF. 
C)  a movement from a point inside the PPF to a point on the frontier. 
D)  a movement along the PPF. 
A)  an outward shift of the PPF. 
B)  an inward shift of the PPF. 
C)  a movement from a point inside the PPF to a point on the frontier. 
D)  a movement along the PPF.

Question 14

Use the following to answer questions:
Figure: Sofas and Windows  
-(Figure: Sofas and Windows) In the PPF diagram, what is the opportunity cost of producing an additional sofa?

Accepted Answer

A)  1 1/4 sofas 
B)  4/5 of a window 
C)  1 window 
D)  4/5 of a sofa 
A)  1 1/4 sofas 
B)  4/5 of a window 
C)  1 window 
D)  4/5 of a sofa

Question 15

Use the following to answer questions:
Figure: Countries A and B  
-(Figure: Countries A and B) Refer to the figure regarding countries A and B. If each country allocated half of its labor force to the production of each good before trade and were to then each specialize in their comparative advantage and allocate 75 percent of its labor force to the production of that good, world production of Good X would change by _____ and the production of Good Y by _____.

Accepted Answer

A)  40; 50 
B)  25; -5 
C)  15; -5 
D)  50; 40 
A)  40; 50 
B)  25; -5 
C)  15; -5 
D)  50; 40

Question 16

Jim has an old (working) television that he would like to get rid of now that he has purchased a new high-definition, flat-screen television. The old television is no longer worth anything to him now that he has his new flat-screen TV. Veronica on the other hand has an even older television that has just broken down. She would pay up to $50 for any working TV. If Jim trades Veronica his old television for $50, both are better off but total value in society does not increase.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer questions:
Figure: Coffee and Tea  
-(Figure: Coffee and Tea) Refer to the figure. Which of the following is NOT a possible production level?

Accepted Answer

A)  20 million pounds of tea, 140 million pounds of coffee 
B)  120 million pounds of tea, 80 million pounds of coffee 
C)  100 million pounds of tea, 120 million pounds of coffee 
D)  both a and b 
A)  20 million pounds of tea, 140 million pounds of coffee 
B)  120 million pounds of tea, 80 million pounds of coffee 
C)  100 million pounds of tea, 120 million pounds of coffee 
D)  both a and b

Question 18

What is the difference between trade among individuals and trade among nations?

Accepted Answer

A)  The logic of trade and specialization is stronger for individuals than it is for nations. 
B)  The logic of trade and specialization is stronger for nations than it is for individuals. 
C)  The logic of trade and specialization applies equally well among individuals and nations. 
D)  Without looking at specific cases, we can't say much about the logic of trade and specialization for individuals and nations. 
A)  The logic of trade and specialization is stronger for individuals than it is for nations. 
B)  The logic of trade and specialization is stronger for nations than it is for individuals. 
C)  The logic of trade and specialization applies equally well among individuals and nations. 
D)  Without looking at specific cases, we can't say much about the logic of trade and specialization for individuals and nations.

Question 19

In Spain it takes 10 workers to produce one barrel of wine and four workers to produce one yard of cloth. Thus, the opportunity cost of producing one barrel of wine is 2.5 yards of cloth.

Accepted Answer

A) True 
 B)False

Question 20

Facilitators of trade (such as Pierre Omidyar, the developer of eBay):

Accepted Answer

A)  may become very rich since they are creating value for many individuals. 
B)  find it very hard to profit from their services since they are not directly involved in the trades. 
C)  typically only profit from their services if they are able to obtain government patent rights. 
D)  are usually seen as taking advantage of consumers. 
A)  may become very rich since they are creating value for many individuals. 
B)  find it very hard to profit from their services since they are not directly involved in the trades. 
C)  typically only profit from their services if they are able to obtain government patent rights. 
D)  are usually seen as taking advantage of consumers.

Exam 2: The Power of Trade and Comparative

Trade barriers like the Berlin Wall:

The basic idea of trade is to buy the things you could only make at a high opportunity cost, and sell the things you can make at a low opportunity cost.

If Joyce can gather 15 logs a day or catch 10 fish a day and Percy can gather five logs a day or catch five fish a day, then Percy has a comparative advantage in gathering fish.

The production possibilities frontier shows:

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Specialization and trade between them can benefit:

Trade increases productivity when production is carried out by the person/group with the comparative advantage.

Employing comparative advantage increases the total satisfaction with what's produced, but not the total amount of what's produced.

Comparative advantage occurs when an individual's opportunity cost for producing the same good or service is lower than that of another individual.

Martha Stewart does not do her own ironing because she:

A country has a comparative advantage in producing a good when it produces that good:

Trade causes wages in countries with high productivity to increase and wages in countries with low productivity to decrease.

When using a production possibilities frontier (PPF), a trade-off is demonstrated by:

Use the following to answer questions: Figure: Sofas and Windows -(Figure: Sofas and Windows) In the PPF diagram, what is the opportunity cost of producing an additional sofa?

Use the following to answer questions: Figure: Coffee and Tea -(Figure: Coffee and Tea) Refer to the figure. Which of the following is NOT a possible production level?

What is the difference between trade among individuals and trade among nations?

In Spain it takes 10 workers to produce one barrel of wine and four workers to produce one yard of cloth. Thus, the opportunity cost of producing one barrel of wine is 2.5 yards of cloth.

Facilitators of trade (such as Pierre Omidyar, the developer of eBay):

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