Chapter 3 Quiz

Suppose the world consists of two countries—the United States and Mexico. Furthermore, suppose there are only two goods—food and clothing. Which of the following statements is true? a. If the United States has an absolute advantage in the production of food, then Mexico must have an absolute advantage in the production of clothing. b. If the United States has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing. c. If the United States has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing. d. If the United States has a comparative advantage in the production of food, Mexico might also have a comparative advantage in the production of food. e. None of the above is true.

b

If a nation has a comparative advantage in the production of a good,

it can produce that good at a lower opportunity cost than its trading partner.

If a nation has an absolute advantage in the production of a good,

it can produce that good using fewer resources than its trading partner.

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 Korea should

specialize in electronics production, export electronics, and import food.

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade,

the domestic price of 1 ring is 1/3 of a watch.

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade,

the opportunity cost of 1 watch is 3 rings.

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 The opportunity cost of 1 unit of food in Korea is

1/2 of a unit of electronics.

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 The opportunity cost of 1 unit of food in Australia is

1/4 of a unit of electronics.

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 The opportunity cost of 1 unit of electronics in Korea is

2 units of food.

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 The opportunity cost of 1 unit of electronics in Australia is

4 units of food.

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 Prices of electronics can be stated in terms of units of food. What is the range of prices of electronics for which both countries could gain from trade?

The price must be greater than 2 units of food but less than 4 units of food.

Which of the following statements about trade is true?

Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 Which of the following statements about comparative advantage is true? a. Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics. b. Korea has a comparative advantage in the production of food while Australia has a comparative advantage in the production of electronics. c. Australia has a comparative advantage in the production of both food and electronics. d. Korea has a comparative advantage in the production of both food and electronics. e. Neither country has a comparative advantage

a

Which of the following statements is true? a. A self-sufficient country at best can consume on its production possibilities frontier. b. Self-sufficiency is the road to prosperity for most countries. c. Only countries with an absolute advantage in the production of every good should strive to be self-sufficient. d. A self-sufficient country consumes outside its production possibilities frontier.

a

The following table shows the units of output a worker can produce per month in Australia and Korea. Use this table to answer question Food Electronics Australia 20 5 Korea 8 4 Which of the following statements about absolute advantage is true? a. Australia has an absolute advantage in the production of food while Korea has an absolute advantage in the production of electronics. b. Australia has an absolute advantage in the production of both food and electronics. c. Korea has an absolute advantage in the production of food while Australia has an absolute advantage in the production of electronics. d. Korea has an absolute advantage in the production of both food and electronics.

b

According to the principle of comparative advantage,

countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.