Chapter 3 Econ HW

Trade allows a country to consume outside its production possibilities frontier(True or False)

True

Refer to Table 3-6. England has an absolute advantage in

both goods and Spain has an absolute advantage in neither good.

Total output in an economy increases when each person specializes because

each person spends more time producing that product in which he or she has a comparative advantage.

Refer to Table 3-6. The opportunity cost of 1 unit of bread in England is

2 units of cheese.

Refer to Table 3-6. The opportunity cost of 1 unit of cheese in Spain is

1/4 unit of bread

Refer to Table 3-2. For Helen, the opportunity cost of 1 dress is

1/5 quilt.

Refer to Table 3-2. For Carolyn, the opportunity cost of 1 quilt is

2 dresses.

Refer to Figure 3-2. Suppose Ben's production possibilities frontier is based on 4 hours of work. How much time does Ben require to produce 1 pound of ice cream?

2 hours

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is

2.8 bushels of corn.

Refer to Figure 3-2. For Jerry, the opportunity cost of 1 pound of cones is

2/3 pound of ice cream.

Refer to Figure 3-2. For Jerry, the opportunity cost of 1 pound of ice cream is

3/2 pounds of cones.

Refer to Figure 3-4. Initially, Barney is spending one-half of his time making pies and the other one-half of his time making bread, and Betty is doing the same. Relative to this initial situation, Barney and Betty could specialize according to the principle of comparative advantage, and both could benefit from this new arrangement, provided they agree that one loaf of bread will trade for somewhere between

3/4 pie and 2 pies.

Refer to Figure 3-2. For Ben, the opportunity cost of 1 pound of ice cream is

4 pound of cones.

Refer to Table 3-6. The opportunity cost of 1 unit of bread in Spain is

4 units of cheese.

Refer to Figure 3-4. The opportunity cost of 1 pie for Betty is

4/3 loaves of bread.

Refer to Table 3-2. For Helen, the opportunity cost of 1 quilt is

5 dresses.

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is

5/3 bushels of corn

Which of the following statements is not correct?

Absolute advantage is the driving force of specialization.

Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade,

All of the above are correct.

Consider a shoemaker and a vegetable farmer. Potentially, trade could benefit both individuals if

All of the above are correct.

Refer to Figure 3-2. Suppose Ben and Jerry have both decided to produce at point A on their respective production possibilities frontiers. We know that

Ben and Jerry are both allocating 1/2 of their time to the production of each good.

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

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.

If it takes U.S. workers fewer hours to produce every good than it takes German workers, the United States cannot gain from trade with Germany.(True or False)

False

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

False

The producer who has the smaller opportunity cost of producing a good is said to have an absolute advantage in producing that good.(True or False)

False

The principle of comparative advantage does not provide answers to certain questions. One of those questions is as follows:

How are the gains from trade shared among the parties to a trade?

As long as two people have different opportunity costs, each can gain from trade, since trade allows each person to obtain a good at a price lower than his or her opportunity cost.(True or False)

True

Differences in opportunity cost allow for gains from trade.(True or False)

True

For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good(True or False)

True

International trade may make some individuals in a nation better off, while other individuals are made worse off (True or False)

True

Refer to Table 3-6. England has an absolute advantage in

both goods and Spain has a comparative advantage in cheese.

The difference between production possibilities frontiers that are bowed out and those that are straight lines is that

bowed-out production possibilities frontiers illustrate increasing opportunity cost, whereas straight-line production possibilities frontiers illustrate constant opportunity cost.

Refer to Table 3-6. If England and Spain specialize and trade based on the principle of comparative advantage, England will export which product to Spain?

bread

Refer to Table 3-6. England has a comparative advantage in

bread and Spain has an absolute advantage in neither good.

Refer to Table 3-6. England and Spain both could benefit, relative to a situation in which neither country is specializing, by England specializing in

bread and Spain specializing in cheese.

Refer to Table 3-6. If England and Spain specialize and trade based on the principle of comparative advantage, England will export

bread and Spain will export cheese.

Refer to Table 3-6. If England and Spain specialize and trade based on the principle of comparative advantage, Spain will export which product to England?

cheese

Refer to Table 3-6. If England and Spain trade based on the principle of comparative advantage, England will import

cheese and Spain will import bread.

Refer to Figure 3-2. Ben has a comparative advantage in

cones and Jerry has a comparative advantage in ice cream.

Refer to Figure 3-2. Ben has an absolute advantage in

cones and Jerry has an absolute advantage in ice cream.

Refer to Table 3-2. Helen has a comparative advantage in

dresses and Carolyn has a comparative advantage in quilts.

A production possibilities frontier will be a straight line if

increasing the production of one good by x units entails a constant opportunity cost in terms of the other good.

Absolute advantage is found by comparing different producers'

input requirements per unit of output.

Refer to Figure 3-4. If Barney and Betty both specialize in the good in which they have a comparative advantage,

total production of bread will be 20 and total production of pies will be 14.