ECON CH 2

A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is ______________

2.67 bushels of corn

Suppose France can produce four phones or three computers with one unit of labor, and Sweden can produce one phone or two computers with one unit of labor. If France can trade only with Sweden, then the theory of comparative advantage suggests that:

France should specialize in producing phones and import computers from Sweden.

Two countries that specialize where they have a comparative advantage and then trade with each other will experience increases in:I. wages in both countries.II. total output in both countries.III. living standards in both countries.

I, II, and III

Which of the following statements is TRUE?

Specialization and trade raise wages in both countries that are party to the trade.

(Table: iPhone and iPod Production) According to the table on iPhone and iPod production, which of the following is TRUE?

The United States has an absolute advantage in producing both iPhones and iPods.

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?

The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.

absolute advantage

Which term best describes that situation that, relative to England, France can produce beef at a lower cost of production(i.e., can produce beef using fewer inputs)?

The ability of one producer to produce one good or service using fewer inputs than another producer is:

absolute advantage.

Specialization and trade can ______ the per unit cost of production because ______.

decrease; it creates economies of scale associated with large-scale production

A gardener can produce either beans or corn in her garden. The gardener's opportunity cost of a bushel of beans multiplied by her opportunity cost of a bushel of corn is

equal to one. (This is because the opportunity cost of beans in terms of corn will be the inverse of the opportunity cost of corn. Multiplying a number by its inverse equals 1)

A nation will not have a comparative advantage in a product if it does not also have an absolute advantage in the production of that good.

false

Absolute advantage is the source of the potential gains from specialization and trade.

false

The process of specialization and trade has positive net benefits and is, therefore, beneficial to everyone.

false

Absolute advantage can be determined by comparing different producers

input requirements per unit of output

When trading with more developed countries,

less developed countries have a comparative advantage in the production of some goods or services.

According to the theory of comparative advantage, the reason wages are lower in China than in the United States is:

lower productivity in China.

Division of knowledge refers to:

people learning different tasks in which they specialize.

comparative advantage

the ability to produce a good or service at a lower opportunity cost than another

Globalization is:

the advance of human cooperation across national boundaries.

The production possibilities frontier shows:

the combinations of outputs a country can produce given its resources and productivity.

Countries specialize in the production of goods for which they have a comparative advantage.

true

It can be mutually beneficial for two nations to specialize in goods for which they have a comparative advantage and then trade with one another.

true