Question 1

Mark values his drum set at $800 and Ella values her guitar at $1,000.Suppose that Mark trades his drum set for Ella's guitar.

Accepted Answer

A)  This trade makes Ella worse off by $200. 
B)  This trade makes Mark better off by $200. 
C)  Mark must value Ella's guitar for at least $800,and Ella must value Mark's drum set for at least $1,000. 
D)  This trade decreases total value by moving the guitar and drum away from people who placed a high value on them. 
A)  This trade makes Ella worse off by $200. 
B)  This trade makes Mark better off by $200. 
C)  Mark must value Ella's guitar for at least $800,and Ella must value Mark's drum set for at least $1,000. 
D)  This trade decreases total value by moving the guitar and drum away from people who placed a high value on them.

Question 2

Only a very small portion of people who use microwaves know how they work.This is an example of:

Accepted Answer

A)  a production possibility frontier. 
B)  division of knowledge. 
C)  absolute advantage. 
D)  opportunity cost. 
A)  a production possibility frontier. 
B)  division of knowledge. 
C)  absolute advantage. 
D)  opportunity cost.

Question 3

Countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

Accepted Answer

A) True 
 B)False

Question 4

Poor countries are at a distinct disadvantage when it comes to economic production;they get outcompeted in everything since they do not have a comparative advantage in anything.

Accepted Answer

A) True 
 B)False

Question 5

eBay creates value by:

Accepted Answer

A)  helping sellers trick buyers into purchasing broken items. 
B)  moving goods like broken laser pointers from people who don't want them to people who do. 
C)  helping people with the same preferences find each other. 
D)  moving toys from children who want them to children who don't. 
A)  helping sellers trick buyers into purchasing broken items. 
B)  moving goods like broken laser pointers from people who don't want them to people who do. 
C)  helping people with the same preferences find each other. 
D)  moving toys from children who want them to children who don't.

Question 6

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 7

Because Chinese wages are much lower than wages in the United States,the Chinese can outcompete the United States in everything.

Accepted Answer

A) True 
 B)False

Question 8

The real cost of producing a good is:

Accepted Answer

A)  the dollar cost of inputs used to make the item. 
B)  the opportunity cost of producing the good. 
C)  the resources that were used to make the good. 
D)  the dollar amount it costs to sell the good. 
A)  the dollar cost of inputs used to make the item. 
B)  the opportunity cost of producing the good. 
C)  the resources that were used to make the good. 
D)  the dollar amount it costs to sell the good.

Question 9

The economist credited with saying,"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," is Adam Smith.

Accepted Answer

A) True 
 B)False

Question 10

Adam Smith:

Accepted Answer

A)  believed that trade in local communities is good for the economy,but trading with people located in foreign countries is bad for the economy. 
B)  did not discuss or have an opinion about international trade. 
C)  argued that it is beneficial to buy a product if the seller can sell it to us cheaper than we can make it for ourselves,regardless of the product's country of origin. 
D)  believed that trade in local communities is bad for the economy,but trading with people located in foreign countries is good for the economy. 
A)  believed that trade in local communities is good for the economy,but trading with people located in foreign countries is bad for the economy. 
B)  did not discuss or have an opinion about international trade. 
C)  argued that it is beneficial to buy a product if the seller can sell it to us cheaper than we can make it for ourselves,regardless of the product's country of origin. 
D)  believed that trade in local communities is bad for the economy,but trading with people located in foreign countries is good for the economy.

Question 11

Trade makes rich people richer and poor people poorer.

Accepted Answer

A) True 
 B)False

Question 12

Trade creates value because:

Accepted Answer

A)  people get what they want. 
B)  raw materials are transformed into finished products. 
C)  people exchange things they do not want for things they do. 
D)  idle resources are put to use. 
A)  people get what they want. 
B)  raw materials are transformed into finished products. 
C)  people exchange things they do not want for things they do. 
D)  idle resources are put to use.

Question 13

David sells his car,which he considers worthless,to Cameron for $200.Which of the following statements is true?

Accepted Answer

A)  David and Cameron must have different preferences for the car. 
B)  This trade did not create value because Cameron is buying a car that David considers worthless. 
C)  Cameron is the only one made better off by the trade. 
D)  David is made better off by the trade,but Cameron is made worse off. 
A)  David and Cameron must have different preferences for the car. 
B)  This trade did not create value because Cameron is buying a car that David considers worthless. 
C)  Cameron is the only one made better off by the trade. 
D)  David is made better off by the trade,but Cameron is made worse off.

Question 14

If instead of specialized doctors (neurologists,cardiologists,gastroenterologists,etc. )we had doctors who each knew the same things about all aspects of medicine,it would be:

Accepted Answer

A)  better because then we could just go to one doctor with no loss of quality in medical care. 
B)  better because total medical knowledge in society would increase. 
C)  worse because the human brain is limited. 
D)  worse because total medical knowledge in society would decrease. 
A)  better because then we could just go to one doctor with no loss of quality in medical care. 
B)  better because total medical knowledge in society would increase. 
C)  worse because the human brain is limited. 
D)  worse because total medical knowledge in society would decrease.

Question 15

Which of the following statements shows how absolute advantage can be distinguished from comparative advantage?

Accepted Answer

A)  Absolute advantage refers to the ability to produce a good using fewer inputs,while comparative advantage is based on the monthly amount. 
B)  Absolute advantage is based on the yearly production amount that a country can produce,while comparative advantage is based on the monthly production amount. 
C)  Absolute advantage refers to the ability to produce a larger amount of goods with the same number of inputs,whereas comparative advantage refers to the ability to have the lowest opportunity cost of production. 
D)  Absolute advantage is based on the amount of land a country has to use,while comparative advantage is based on the cost of the labor. 
A)  Absolute advantage refers to the ability to produce a good using fewer inputs,while comparative advantage is based on the monthly amount. 
B)  Absolute advantage is based on the yearly production amount that a country can produce,while comparative advantage is based on the monthly production amount. 
C)  Absolute advantage refers to the ability to produce a larger amount of goods with the same number of inputs,whereas comparative advantage refers to the ability to have the lowest opportunity cost of production. 
D)  Absolute advantage is based on the amount of land a country has to use,while comparative advantage is based on the cost of the labor.

Question 16

The United States and the European Union are groups of semi-independent states that have come together under an agreement whereby resources can travel freely across borders and a common currency is in use.Which of the following statements best explains how this allows for the achievement of economies of scale?

Accepted Answer

A)  Each state or country can now target larger markets and can thus earn more export revenue. 
B)  States and countries no longer have to worry about borders impeding trade. 
C)  Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production. 
D)  The removal of trade borders and a common currency enhances trade between member states. 
A)  Each state or country can now target larger markets and can thus earn more export revenue. 
B)  States and countries no longer have to worry about borders impeding trade. 
C)  Each state or country can adopt large-scale production techniques that allow lower per-unit costs of production. 
D)  The removal of trade borders and a common currency enhances trade between member states.

Question 17

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 18

According to the textbook,globalization:

Accepted Answer

A)  never took place. 
B)  began as far back as the Roman Empire. 
C)  began in the twenty-first century. 
D)  occurred only during the Dark Ages. 
A)  never took place. 
B)  began as far back as the Roman Empire. 
C)  began in the twenty-first century. 
D)  occurred only during the Dark Ages.

Question 19

Which of the following is TRUE regarding trade and wages?

Accepted Answer

A)  Trade can increase wages by increasing the productivity of labor. 
B)  Trade helps to equalize wages between high- and low-productivity countries. 
C)  Countries with low productivity levels will always have lower wages than high-productivity nations whether they trade or not. 
D)  Trade directly increases productivity,which in turn increases wages. 
A)  Trade can increase wages by increasing the productivity of labor. 
B)  Trade helps to equalize wages between high- and low-productivity countries. 
C)  Countries with low productivity levels will always have lower wages than high-productivity nations whether they trade or not. 
D)  Trade directly increases productivity,which in turn increases wages.

Question 20

Why do people specialize?

Accepted Answer

A)  Specialization increases productivity. 
B)  Specialization decreases people's dependence on one another. 
C)  People become self-sufficient when they specialize. 
D)  Most people only know how to do a few tasks. 
A)  Specialization increases productivity. 
B)  Specialization decreases people's dependence on one another. 
C)  People become self-sufficient when they specialize. 
D)  Most people only know how to do a few tasks.

Mark values his drum set at $800 and Ella values her guitar at $1,000.Suppose that Mark trades his drum set for Ella's guitar.

Only a very small portion of people who use microwaves know how they work.This is an example of:

Countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

Poor countries are at a distinct disadvantage when it comes to economic production;they get outcompeted in everything since they do not have a comparative advantage in anything.

eBay creates value by:

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?

Because Chinese wages are much lower than wages in the United States,the Chinese can outcompete the United States in everything.

The real cost of producing a good is:

The economist credited with saying,"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," is Adam Smith.

Adam Smith:

Trade makes rich people richer and poor people poorer.

Trade creates value because:

David sells his car,which he considers worthless,to Cameron for $200.Which of the following statements is true?

If instead of specialized doctors (neurologists,cardiologists,gastroenterologists,etc. )we had doctors who each knew the same things about all aspects of medicine,it would be:

Which of the following statements shows how absolute advantage can be distinguished from comparative advantage?

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

According to the textbook,globalization:

Which of the following is TRUE regarding trade and wages?

Why do people specialize?

The Big Ideas

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 2: The Power of Trade

Mark values his drum set at $800 and Ella values her guitar at $1,000.Suppose that Mark trades his drum set for Ella's guitar.

Only a very small portion of people who use microwaves know how they work.This is an example of:

Countries can benefit from trading with one another because trade allows each country to specialize in doing what it does best.

Poor countries are at a distinct disadvantage when it comes to economic production;they get outcompeted in everything since they do not have a comparative advantage in anything.

eBay creates value by:

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?

Because Chinese wages are much lower than wages in the United States,the Chinese can outcompete the United States in everything.

The real cost of producing a good is:

The economist credited with saying,"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," is Adam Smith.

Adam Smith:

Trade makes rich people richer and poor people poorer.

Trade creates value because:

David sells his car,which he considers worthless,to Cameron for $200.Which of the following statements is true?

If instead of specialized doctors (neurologists,cardiologists,gastroenterologists,etc. )we had doctors who each knew the same things about all aspects of medicine,it would be:

Which of the following statements shows how absolute advantage can be distinguished from comparative advantage?

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

According to the textbook,globalization:

Which of the following is TRUE regarding trade and wages?

Why do people specialize?

The Big Ideas

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

The Federal Reserve System

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters