Econ 216 Chapter 3

Comparative advantage is related most closely to which of the following?

opportunity cost

What must be given up to obtain an item is called

opportunity cost.

The opportunity cost of 1 bushel of wheat for Cliff is

2/3 bushel of corn.

Suppose Cliff must work 5 hours to produce each bushel of corn. Then Cliff's production possibilities frontier is based on how many hours of work?

20 hours

Suppose Paul must work 2 hours to produce each bushel of corn. Then Paul's production possibilities frontier is based on how many hours of work?

20 hours

The opportunity cost of 2 bushels of corn for Cliff is

3 bushels of wheat.

If Paul divides his time equally between corn and wheat, he will be able to produce

4 bushels of wheat and 5 bushels of corn.

The opportunity cost of 1 bushel of corn is

4/5 bushel of wheat for Paul and 3/2 bushels of wheat for Cliff; thus, Paul has the comparative advantage in growing corn.

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

All of the above are correct.

The principle of comparative advantage as we know it today was developed by

David Ricardo.

Assume Cliff and Paul were both producing wheat and corn, and each person was dividing his time equally between the two. Then each decides to specialize in the product in which he has a comparative advantage. As a result of this change, total production of corn

Increase by 3 bushels.

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Iowa has a comparative advantage in the production of corn.

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible?

Kelly has a comparative advantage in repairing cars and in cooking meals.

Which of the following statements is correct?

Paul has an absolute advantage in both wheat and corn.

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if

The opportunity cost of producing a bushel of wheat is lower for Canada than it is for the U.S

Without trade,

a country's production possibilities frontier is also its consumption possibilities frontier.

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.

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

has an absolute advantage in the production of that good.

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that

his opportunity cost of one watermelon is 2/3 of a cantaloupe.

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

is equal to 1.

Suppose Paul must work 2 hours to produce each bushel of corn. Then Paul

must work 0.4 hours to produce each bushel of wheat, and his opportunity cost of a bushel of corn is 0.8 bushels of wheat.

Suppose Cliff must work 5 hours to produce each bushel of corn. Then Cliff

must work 3 1/3 hours to produce each bushel of wheat, and his opportunity cost of a bushel of corn is 1.5 bushels of wheat.

What must be given up to obtain an item is called

opportunity cost

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

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.

Assume both Paul and Cliff divide their time equally between the production of corn and wheat, and they do not trade. If they are the only producers of wheat and corn, then total production of wheat and corn is

7 bushels of wheat and 7 bushels of corn