Question 1

Figure 3-5
Hosne's Production Possibilities Frontier Merve's Production Possibilities Frontier 
-Refer to Figure 3-5. If the production possibilities frontier shown for Merve is for 8 hours of work, then how long does it take Merve to make one purse?

Accepted Answer

A)  1/2 hour 
B)  2 hours 
C)  4 hours 
D)  8 hours

Question 2

If one producer is able to produce a good at a lower opportunity cost than some other producer, then the producer with the lower opportunity cost is said to have an absolute advantage in the production of that good.

Accepted Answer

A) True 
 B)False

Question 3

Table 3-26
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. 
-Refer to Table 3-26. Assume that Japan and Korea each has 2400 hours available. If each country spends all its time producing the good in which it has a comparative advantage and trade takes place at a price of 12 cars for 6 airplanes, then

Accepted Answer

A)  Japan and Korea will both gain from this trade. 
B)  Japan will gain from this trade, but Korea will not. 
C)  Korea will gain from this trade, but Japan will not. 
D)  neither Japan nor Korea will gain from this trade.

Question 4

In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine?

Accepted Answer

A)  Americans know less than Italians know about cooking noodles. 
B)  The United States has an absolute advantage over Italy in producing noodles. 
C)  Italy has a comparative advantage over the United States in producing wine. 
D)  The opportunity cost of producing a gallon of wine is the same for Italy as it is for the United States.

Question 5

Table 3-39
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. 
-Refer to Table 3-39. Japan should specialize in the production of

Accepted Answer

A)  cars and import airplanes. 
B)  airplanes and import cars. 
C)  both goods and import neither good. 
D)  neither good and import both goods.

Question 6

Trade allows all countries to achieve greater prosperity.

Accepted Answer

A) True 
 B)False

Question 7

Figure 3-25
Chile's Production Possibilities Frontier Colombia's Production Possibilities Frontier 
-Refer to Figure 3-25. Chile should specialize in the production of

Accepted Answer

A)  coffee and import soybeans. 
B)  soybeans and import coffee. 
C)  both goods and import neither good. 
D)  neither good and import both goods.

Question 8

Table 3-32
US and French Production Opportunities 
-Refer to Table 3-32 France has an absolute advantage in the production of

Accepted Answer

A)  wine. 
B)  cheese. 
C)  both wine and cheese. 
D)  neither wine nor cheese.

Question 9

Figure 3-6
Maxine's Production Possibilities Frontier Daisy's Production Possibilities Frontier 
-Refer to Figure 3-6. If the production possibilities frontiers shown are each for one day of work, then which of the following combinations of pies and tarts could Maxine and Daisy together not make in a given day?

Accepted Answer

A)  2 pies and 25 tarts 
B)  10 pies and 22 tarts 
C)  12 pies and 15 tarts 
D)  15 pies and 16 tarts

Question 10

Which of the following statements about comparative advantage is not true?

Accepted Answer

A)  Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. 
B)  The principle of comparative advantage applies to countries as well as to individuals. 
C)  Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. 
D)  A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.

Question 11

Harry is a computer company executive, earning $200 per hour managing the company and promoting its products. His daughter Quinn is a high school student, earning $6 per hour helping her grandmother on the farm. Harry's computer is broken. He can repair it himself in one hour. Quinn can repair it in 10 hours. Harry's opportunity cost of repairing the computer is lower than Quinn's.

Accepted Answer

A) True 
 B)False

Question 12

Table 3-39
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. 
-Refer to Table 3-39. Korea should specialize in the production of

Accepted Answer

A)  cars and import airplanes. 
B)  airplanes and import cars. 
C)  both goods and import neither good. 
D)  neither good and import both goods.

Question 13

Table 3-41 
-Refer to Table 3-41. If the two countries decide to trade with each other, which country should specialize in producing compasses?

Accepted Answer

The answer of Table 3-41 
-Refer to Table 3-41. If...

Question 14

Figure 3-19
Chile's Production Possibilities Frontier Colombia's Production Possibilities Frontier 
-Refer to Figure 3-19. Chile's opportunity cost of one pound of soybeans is

Accepted Answer

A)  3/4 pound of coffee and Colombia's opportunity cost of one pound of soybeans is 1/2 pound of coffee. 
B)  3/4 pound of coffee and Colombia's opportunity cost of one pound of soybeans is 2 pounds of coffee. 
C)  4/3 pounds of coffee and Colombia's opportunity cost of one pound of soybeans is 1/2 pound of coffee. 
D)  4/3 pounds of coffee and Colombia's opportunity cost of one pound of soybeans is 2 pounds of coffee.

Question 15

Table 3-41 
-Refer to Table 3-41. Which country has an absolute advantage in producing compasses?

Accepted Answer

The answer of Table 3-41 
-Refer to Table 3-41. Which...

Question 16

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is true?

Accepted Answer

A)  Both countries could gain from trade with each other. 
B)  Neither country could gain from trade with each other because Cornland has an absolute advantage in both goods. 
C)  Neither country could gain from trade with each other because neither one has a comparative advantage. 
D)  Oatland could gain from trade between the two countries, but Cornland definitively would lose.

Question 17

Scenario 3-1
The production possibilities frontiers below show how much Greg and Catherine can each produce in 8 hours of time.
Greg's Production Possibilities Catherine's Production Possibilities  
-Refer to Scenario 3-1. What is Catherine's opportunity cost of producing ice cream? Explain how you derived your answer.

Accepted Answer

The answer of Scenario 3-1
The production possibilities frontiers below show...

Question 18

Table 3-31  S1U1P1 S1S1P0
-Refer to Table 3-31. In 10 hours,

Accepted Answer

A)  the rancher could produce 2.5 pounds of meat and 1.0 pound of potatoes. 
B)  the rancher could produce 1.0 pound of meat and 1.0 pound of potatoes. 
C)  the farmer could produce 0.25 pounds of meat and 1.6 pounds of potatoes. 
D)  the farmer could produce 0.75 pounds of meat and 1.25 pounds of potatoes.

Question 19

Table 3-29
Juanita and Shantala run a business that programs and tests cellular phones. Assume that Juanita and Shantala can switch between programming and testing cellular phones at a constant rate. The following table applies. 
-Refer to Table 3-29. Juanita has an absolute advantage in

Accepted Answer

A)  programming cellular phones and a comparative advantage in programming cellular phones. 
B)  programming cellular phones and a comparative advantage in testing cellular phones. 
C)  testing cellular phones and a comparative advantage in programming cellular phones. 
D)  testing cellular phones and a comparative advantage in testing cellular phones.

Question 20

Table 3-25
Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. 
-Refer to Table 3-25. Maya has an absolute advantage in the production of

Accepted Answer

A)  both goods and a comparative advantage in the production of mixers. 
B)  both goods and a comparative advantage in the production of toasters. 
C)  neither good and a comparative advantage in the production of mixers. 
D)  neither good and a comparative advantage in the production of toasters.

Exam 3: Interdependence and the Gains From Trade

Figure 3-5 Hosne's Production Possibilities Frontier Merve's Production Possibilities Frontier -Refer to Figure 3-5. If the production possibilities frontier shown for Merve is for 8 hours of work, then how long does it take Merve to make one purse?

If one producer is able to produce a good at a lower opportunity cost than some other producer, then the producer with the lower opportunity cost is said to have an absolute advantage in the production of that good.

In which of the following cases should the United States produce more noodles than it wants for its own use and trade some of those noodles to Italy in exchange for wine?

Table 3-39 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-39. Japan should specialize in the production of

Trade allows all countries to achieve greater prosperity.

Figure 3-25 Chile's Production Possibilities Frontier Colombia's Production Possibilities Frontier -Refer to Figure 3-25. Chile should specialize in the production of

Table 3-32 US and French Production Opportunities -Refer to Table 3-32 France has an absolute advantage in the production of

Which of the following statements about comparative advantage is not true?

Table 3-39 Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate. -Refer to Table 3-39. Korea should specialize in the production of

Table 3-41 -Refer to Table 3-41. If the two countries decide to trade with each other, which country should specialize in producing compasses?

Figure 3-19 Chile's Production Possibilities Frontier Colombia's Production Possibilities Frontier -Refer to Figure 3-19. Chile's opportunity cost of one pound of soybeans is

Table 3-41 -Refer to Table 3-41. Which country has an absolute advantage in producing compasses?

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is true?

Table 3-31 -Refer to Table 3-31. In 10 hours,

Table 3-29 Juanita and Shantala run a business that programs and tests cellular phones. Assume that Juanita and Shantala can switch between programming and testing cellular phones at a constant rate. The following table applies. -Refer to Table 3-29. Juanita has an absolute advantage in

Table 3-25 Assume that Maya and Miguel can switch between producing mixers and producing toasters at a constant rate. -Refer to Table 3-25. Maya has an absolute advantage in the production of