Chapter 3 Exchange and Markets

Country A has a comparative advantage over country B in the production of shoes if

Country A can produce shoes at a lower opportunity cost than country B can

When a specialized worker gains insight into a particular task that leads to better production methods it is called

Innovation

The production advantage enjoyed by one country over another when it uses fewer resources to produce a product than another country is

a absolute advantage

When one country can produce a product at a lower opportunity cost in terms of other goods, that country is said to have

a comparative advantage

Mary and Tom both volunteer at a food pantry that serves the poor in their town. They both pack bags for distribution and make sandwiches. What they can each do in on hour. for tom, the opportunity cost of a bag packed it

a. 16 sandwiches b. 2 sandwiches (This is the answer) c. greater than it is for mary d. none of the above

what can they each do in one hour. for tom, the opportunity cost of a sandwich is

a. 2 bags packed b. 8 bags packed c. 1/2 bags packed (this is the answer) d. 1/8 bags packed

what can they each do in one hour. for mary, the opportunity cost of a bag packed is

a. 3 sandwiches (this is the answer) b. 18 sandwiches c. greater than it is for tom d. none of the above

what can they each do in one hour. for mary , the opportunity cost of a sandwich is

a. 6 bags b. 3 bags c. 1/3 bags (this is the answer) d. 1/6 bags

In modern economies, individuals in markets make most of the decisions about?

a. What to produce b. How to produce c. for whom to produce Example: Who, What, How

Markets exist

a. as an arrangement that allows buyers and sellers to exchange things b. because people are not self-sufficient c. because people specialize in the production of one or two products d. all of the above

Markets work better thanks to the invention of

a. contracts b. insurance c. patents d. all the above

Tom has a comparative advantage in packing bags

a. for every bag that tom packs, 2 fewer sandwiches are made, whereas for every bag that mary packs, 3 fewer and sandwiches are made.

Social inventions like contracts, patents, insurance and accounting rules improve the working of markets because they

a. make transactions more secure b. reward innovation c. provide better information about commerical eterprises d. all the above

Division of labor increases productivity because

a. workers spend less time in switching between tasks b. over time worker become more efficient at performing one particular task c. ideas to improve production spring from paying close attention to one particular task d. All of the above

the ability of one person or nation to produce a good at a lower absolute cost than another is

absolute advantage

which of the following is not a role generally played by the government

all the above are roles generally played by the government

which of the following statements are true

b. Tom has the comparative advantage in packing bags

if each person only has one hour to spend on these activities, then the largest number of bags packed and sandwichs made would result if

b. Tom packed bags for one hour and mary made sandwichs for one hour.

how can the government make markets more efficient

by protecting private property

Trade results from

comparative advantage

A specialized worker doesn't spend time switching from one task to another.

continuity

For country A, an export is a good produced in

country A and purchased by residents of country B

According to the theory of comparative advantage, a country

exports the goods in which it has a comparative advantage

Most economies have what economists called

mixed economies

When the government helps to enforce contracts

people trade with more confidence and so makers operate efficiently

pollution is an example of market failure because

polluters may be able to avoid bearing the full cost of their decision

Under a market economy, decisions are guided by

prices

Entrepreneurs are driven by

prices and profits

The more times a worker performs a particular task, the more proficient the worker becomes at that task

repetition

The theory of comparative advantage states that

specialization and free trade will benefit all trading partners

According to the theory of comparative advantage, a country should

specialize and export goods with the LOWEST opportunity cost

in the united states, primary responsibility for paving highways and running colleges and universities rests with

state government

a rich nation will trade with a poor nation because the

the poor nation has the comparative advantage in product

how do national governments intervene in international trade

they erect barriers to trade through and other restrictions