Question 1

What is comparative advantage based on?

Accepted Answer

A)  capital costs
B)  labour costs
C)  dollar price
D)  opportunity costsE) All of the above
F) C) and D)

Question 2

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 5 bushels of corn or 50 bushels of oats per year.There are 20 workers in Cornland and 20 workers in Oatland.If the two countries do not trade,Cornland will produce and consume 400 bushels of corn and 100 bushels of oats,while Oatland will produce and consume 50 bushels of corn and 500 bushels of oats.Combined output for the two countries would therefore be 450 bushels of corn and 600 bushels of oats.If the two countries do trade,each will completely specialize in producing the crop for which it has a comparative advantage.If trade occurs,by what amount will the combined output for the two countries increase?

Accepted Answer

A)  800 bushels of corn and 1000 bushels of oats
B)  400 bushels of corn and 500 bushels of oats
C)  350 bushels of corn and 400 bushels of oats
D)  200 bushels of corn and 200 bushels of oatsE) B) and D)
F) B) and C)

Question 3

Table 3-1
 
-Refer to Table 3-1.How could the farmer and rancher both benefit?

Accepted Answer

A)  by the farmer specializing in meat and the rancher specializing in potatoes
B)  by the farmer specializing in potatoes and the rancher specializing in meat
C)  by the farmer specializing in neither good and the rancher specializing in both goods
D)  by the farmer specializing in both goods and the rancher specializing in neither goodE) B) and D)
F) B) and C)

Question 4

Table 3-4
 
-Refer to the table.What is the opportunity cost of one basket for Alberta?

Accepted Answer

A)  1/3 birdhouse
B)  1 birdhouse
C)  3 birdhouses
D)  4 birdhousesE) None of the above
F) A) and B)

Question 5

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour.
 
-Refer to Figure 3-5.If Fred and Ginger devote half of their time (20 hours) to the production of each good,what would the total production be?

Accepted Answer

A)  7 ballet slippers and 8 tap shoes
B)  8 ballet slippers and 8 tap shoes
C)  9 ballet slippers and 6 tap shoes
D)  10 ballet slippers and 8 tap shoesE) All of the above
F) None of the above

Question 6

Figure 3-6
These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery.
 
-Refer to Figure 3-6.What is the opportunity cost of one loaf of bread for Barney?

Accepted Answer

A)  1/4 pie
B)  1/2 pie
C)  1 pie
D)  2 piesE) A) and B)
F) None of the above

Question 7

Suppose a producer can produce shoes with lower opportunity cost than boots.What else do we need to know if we want to determine this producer's comparative advantage?

Accepted Answer

A)  how this producer's opportunity cost compares with other producer's opportunity cost
B)  nothing, the producer has a comparative advantage in boots.
C)  how many hours of work each product requires
D)  nothing, the producer has a comparative advantage in shoesE) All of the above
F) A) and B)

Question 8

It takes Russell 6 hours to produce a bushel of corn and 2 hours to wash and polish a car.It takes Wilma 6 hours to produce a bushel of corn and 1 hour to wash and polish a car.Wilma and Russell cannot gain from specialization and trade,since it takes each of them 6 hours to produce 1 bushel of corn.

Accepted Answer

A) True 
 B)False

Question 9

Table 3-3
 
-Refer to Table 3-3.What is the opportunity cost of one quilt for Carolyn?

Accepted Answer

A)  2 dresses
B)  3 dresses
C)  4 dresses
D)  5 dressesE) A) and C)
F) A) and D)

Question 10

Figure 3-3
Ice cream and cones are measured in kilograms.
 
-Refer to Figure 3-3.For Jerry,what is the opportunity cost of 1 kg of cones?

Accepted Answer

A)  2/3 kg of ice cream
B)  1 kg of ice cream
C)  2 kg of ice cream
D)  3 kg of ice creamE) A) and B)
F) B) and C)

Question 11

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year,and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year.There are 10 workers in each country.No trade occurs between the two countries.Boatland produces and consumes 25 units of wheat and 125 units of fish per year,while Farmland produces and consumes 125 units of wheat and 25 units of fish per year.If trade were to occur,Boatland would trade 100 units of fish to Farmland in exchange for 100 units of wheat.If Boatland no longer grew any of its own wheat,how many units of fish could it now consume along with the 100 units of imported wheat?

Accepted Answer

A)  25 units
B)  75 units
C)  150 units
D)  250 unitsE) B) and D)
F) B) and C)

Question 12

Which of the following does trade NOT allow for?

Accepted Answer

A)  a more efficient use of resources
B)  goods to be obtained at a lower opportunity cost
C)  people to specialize in activities in which they have a comparative advantage
D)  some countries to gain political control over trading partnersE) B) and C)
F) A) and B)

Question 13

Table 3-5
 
-Refer to Table 3-5.Which country has an absolute or comparative advantage in each product?

Accepted Answer

A)  Japan has a comparative advantage in airplanes, and Canada has an absolute advantage in cars.
B)  Japan has a comparative advantage in cars, and Canada has an absolute advantage in airplanes.
C)  Japan has a comparative advantage in cars, and Canada has an absolute advantage in neither good.
D)  Japan has a comparative advantage in airplanes, and Canada has an absolute advantage in both goods.E) C) and D)
F) A) and C)

Question 14

What is David Ricardo's contribution?

Accepted Answer

A)  He wrote books opposing the ideas of Adam Smith.
B)  He was the founder of modern economics.
C)  He argued in favour of Britain following a free-trade policy.
D)  He wrote An Inquiry into the Nature and Causes of the Wealth of Nations.E) None of the above
F) A) and D)

Question 15

Figure 3-4

-Refer to Figure 3-4.What does each of the two producers have a comparative or absolute advantage in?

Accepted Answer

A)  Ben has a comparative advantage in wine, and Jerry has an absolute advantage in both goods.
B)  Ben has a comparative advantage in beer, and Jerry has an absolute advantage in both goods.
C)  Ben has a comparative advantage in beer, and Jerry has an absolute advantage in wine.
D)  Ben has a comparative advantage in wine, and Jerry has an absolute advantage in beer.E) A) and B)
F) B) and C)

Question 16

What are exports?

Accepted Answer

A)  limits placed on the quantity of goods brought into a country
B)  goods produced abroad and sold domestically
C)  a country's ability to produce a good
D)  goods produced domestically and sold abroadE) A) and B)
F) A) and C)

Question 17

Which of the following would NOT occur if each person specializes in the good for which they have a comparative advantage?

Accepted Answer

A)  Each person's production possibilities frontier will shift outward.
B)  Total production in the economy will increase.
C)  Everyone can be better off with specialization and trade.
D)  The size of the economic pie will increase.E) A) and B)
F) A) and C)

Question 18

What is the best reason for people to provide you with goods and services?

Accepted Answer

A)  They are acting out of generosity.
B)  They are acting because they like you.
C)  They do so because they get something in return.
D)  They are required to do so by the government.E) C) and D)
F) B) and C)

Question 19

According to Adam Smith,what should a person never attempt to make at home?

Accepted Answer

A)  whatever will cost one more to make than to buy
B)  everything one person needs to live
C)  what one doesn't know how to make
D)  any necessity of lifeE) A) and C)
F) A) and B)

Question 20

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour.
 
-Refer to Figure 3-5.What is the opportunity cost of one pair of ballet slippers for Ginger?

Accepted Answer

A)  1/4 pair of tap shoes
B)  1/3 pair of tap shoes
C)  3/4 pair of tap shoes
D)  4/3 pairs of tap shoesE) None of the above
F) A) and B)

Exam 3: Interdependence and the Gains from Trade

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.If Fred and Ginger devote half of their time (20 hours) to the production of each good,what would the total production be?

Correct Answer
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Figure 3-4 -Refer to Figure 3-4.What does each of the two producers have a comparative or absolute advantage in?

Correct Answer
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What is the best reason for people to provide you with goods and services?

Correct Answer
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Suppose a producer can produce shoes with lower opportunity cost than boots.What else do we need to know if we want to determine this producer's comparative advantage?

Correct Answer
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Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.What is the opportunity cost of one pair of ballet slippers for Ginger?

Correct Answer
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Which of the following does trade NOT allow for?

Correct Answer
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Table 3-4 -Refer to the table.What is the opportunity cost of one basket for Alberta?

Correct Answer
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Which of the following would NOT occur if each person specializes in the good for which they have a comparative advantage?

Correct Answer
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Correct Answer
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What is comparative advantage based on?

Correct Answer
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Table 3-1 -Refer to Table 3-1.How could the farmer and rancher both benefit?

Correct Answer
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Table 3-5 -Refer to Table 3-5.Which country has an absolute or comparative advantage in each product?

Correct Answer
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What is David Ricardo's contribution?

Correct Answer
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According to Adam Smith,what should a person never attempt to make at home?

Correct Answer
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What are exports?

Correct Answer
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Table 3-3 -Refer to Table 3-3.What is the opportunity cost of one quilt for Carolyn?

Correct Answer
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Figure 3-6 These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery. -Refer to Figure 3-6.What is the opportunity cost of one loaf of bread for Barney?

Correct Answer
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Correct Answer
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Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.For Jerry,what is the opportunity cost of 1 kg of cones?

Correct Answer
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Exam 3: Interdependence and the Gains from Trade

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.If Fred and Ginger devote half of their time (20 hours) to the production of each good,what would the total production be?

Correct AnswerverifiedShow Answer

Figure 3-4 -Refer to Figure 3-4.What does each of the two producers have a comparative or absolute advantage in?

Correct AnswerverifiedShow Answer

What is the best reason for people to provide you with goods and services?

Correct AnswerverifiedShow Answer

Suppose a producer can produce shoes with lower opportunity cost than boots.What else do we need to know if we want to determine this producer's comparative advantage?

Correct AnswerverifiedShow Answer

Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.What is the opportunity cost of one pair of ballet slippers for Ginger?

Correct AnswerverifiedShow Answer

Which of the following does trade NOT allow for?

Correct AnswerverifiedShow Answer

Table 3-4 -Refer to the table.What is the opportunity cost of one basket for Alberta?

Correct AnswerverifiedShow Answer

Which of the following would NOT occur if each person specializes in the good for which they have a comparative advantage?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is comparative advantage based on?

Correct AnswerverifiedShow Answer

Table 3-1 -Refer to Table 3-1.How could the farmer and rancher both benefit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 3-5 -Refer to Table 3-5.Which country has an absolute or comparative advantage in each product?

Correct AnswerverifiedShow Answer

What is David Ricardo's contribution?

Correct AnswerverifiedShow Answer

According to Adam Smith,what should a person never attempt to make at home?

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What are exports?

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Table 3-3 -Refer to Table 3-3.What is the opportunity cost of one quilt for Carolyn?

Correct AnswerverifiedShow Answer

Figure 3-6 These figures illustrate the production possibilities available to Barney and Betty with eight hours of labour in their bakery. -Refer to Figure 3-6.What is the opportunity cost of one loaf of bread for Barney?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.For Jerry,what is the opportunity cost of 1 kg of cones?

Correct AnswerverifiedShow Answer

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