Exam 2: The Power of Trade

An advantage to specialization is that it can decrease the average cost of production by concentrating on smaller-scale production.

Specialization and trade can _____ the per-unit cost of production because _____ .

Trade refers to the exchange of goods and services between at least two different nations.

Adam Smith said,"It is the maxim of every prudent master of a family never to attempt to make at home what it will cost him more to make than to buy.The tailor does not attempt to make his own shoes,but buys them of the shoemaker.The shoemaker does not attempt to make his own clothes,but employs a tailor." Which of the following concepts best illustrates Smith's intent with this statement?

Which of the following is typically a result of the division of knowledge?

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

According to the theory of trade,if two countries trade with each other:

The wage rate in India is lower than the wage rate in the United States because Indian workers are more productive than U.S.workers.

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.

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

Large cities should have more professional closet organizers than small cities.

Trades are considered zero-sum transactions since when one person gains,the other loses an equal amount.

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

A country or individual that is best at doing something should always undertake that activity to maximize gains from trade.

U.S.pharmaceutical companies sell drugs to Kenya,and Kenyan farmers sell flowers to the U.S.This pattern of trade suggests that the U.S.is the low-opportunity-cost producer of drugs and Kenya is the low-opportunity-cost producer of flowers.

Suppose a famous baseball player,Alex Rodriguez,hires a high school student to paint his house.Which of the following is most likely TRUE?

The enormous variety of goods and services that we consume each day can be attributed mainly to:

When comparing two countries with two goods each,if one country has a comparative advantage in one good,the other country will have a comparative advantage in the other good.

Increased communication speed played a significant role in recent developments that led to increased trade and globalization?

Absolute advantage derives from which of the following?