Chapter 17

If a country has an absolute advantage in producing a good, it means that:

the country is able to produce that good using fewer resources than other countries.

If a country experiences economies of scale in the production of a good, it implies that:

the long-run average cost of production falls as the scale of operation expands.

Autarky is:

the situation of national self-sufficiency, in which there is no economic interaction with foreign producers or consumers.

Suppose Cambria and Bodoni are the only two countries in the world and they produce computers and shoes. Cambria has 100 workers, and Bodoni has 200 workers. The table shows the per-day production possibilities for each country. Suppose the data in the table is converted into production possibilities frontiers (PPFs), with constant opportunity costs, for both countries. The number of computers produced is measured on the vertical axis and the pairs of shoes produced are measured along the horizontal axis. In this case, _____.

the slope of Cambria's PPF equals -2 and the slope of Bodoni's PPF equals -1/2

The terms of trade refers to:

the world price of a good determined by the world supply and demand for the good.

In a two-country, two-commodity framework, when one country has an absolute advantage in the production of both commodities, ____

differences in the opportunity cost of production between the two countries ensure that specialization and trade result in mutual gains

The law of comparative advantage states that:

each country should specialize in producing the good with the lowest opportunity cost.

Which of the following reasons best explains U.S. imports of crude oil from Saudi Arabia and diamonds from South Africa?

. Differences in resource endowments

Suppose Cambria and Bodoni are the only two countries in the world and they produce computers and shoes. Cambria has 100 workers, and Bodoni has 200 workers. The table shows the per-day production possibilities for each country. The per-worker opportunity cost of producing 1 pair of shoes in Bodoni is:

0.5 computers.

Suppose Cambria and Bodoni are the only two countries in the world and they produce computers and shoes. Cambria has 100 workers, and Bodoni has 200 workers. The table shows the per-day production possibilities for each country. The per-worker opportunity cost of producing 1 computer in Cambria is:

0.5 pairs of shoes.

Suppose Cambria and Bodoni are the only two countries in the world and they produce computers and shoes. Cambria has 100 workers, and Bodoni has 200 workers. The table shows the per-day production possibilities for each country. The most favorable terms of trade for both Cambria and Bodoni would be:

1 computer exchanging for 1 pair of shoes

Exports accounted for _____of the U.S. GDP in 2012.

14 percent

Which of the following assumptions is required for a production possibilities curve to be a straight line?

Resources are equally adaptable to the production of both goods in a country.

Suppose Cambria and Bodoni are the only two countries in the world and they produce computers and shoes. Cambria has 100 workers, and Bodoni has 200 workers. The table shows the per-day production possibilities for each country. Which of the following statements is true of Cambria and Bodoni?

Cambria has a comparative advantage in computers, and Bodoni has a comparative advantage in shoes.

Which of the following reasons best explains why the United States is a net importer of crude oil and metals and a net exporter of farm crops?

Differences in resource endowments.

Which of the following reasons explains why many small-population countries import automobiles from Japan, the United States, and Germany rather than produce them domestically?

Economies of scale

In 2012, which category accounted for the largest share of U.S. exports?

Services.

In 2012, which category accounted for the largest share of U.S. imports?

Industrial supplies

Suppose country Alpha must give up 2 units of clothing for each unit of food produced, while country Omega must give up 1/2 of a unit of clothing for each unit of food produced. If specialization and trade were to occur between these two countries, which of the following would be consistent with the theory of comparative advantage and mutually advantageous trade?

Omega will sell food to Alpha at a price of 1 unit of clothing for each unit of food.

The consumption possibilities frontier shows:

a nation's possible combinations of goods available as a result of specialization and exchange.

Suppose Cambria and Bodoni are the only two countries in the world and they produce computers and shoes. Cambria has 100 workers, and Bodoni has 200 workers. The table shows the per-day production possibilities for each country. As a result of specialization and trade, _____.

both Cambria and Bodoni can consume more quantities of both goods than they did before trade

Suppose Aharoni and Kalinga are the only two countries in the world and they produce computers and shoes. Aharoni has 100 workers, and Kalinga has 200 workers. The table below shows the per-day production possibilities for each country. Aharoni has a(n) _____. Table 17.1:

comparative advantage in computers