Econ 2010 chapter 2 questions (Exam 1)

In general, individuals and nations should specialize in producing those goods for which they have a(n):

comparative advantage.

If a nation has the lowest opportunity cost of producing a good, that nation has a(n) ________ in the production of that good.

comparative advantage

A country is most likely to have a comparative advantage in the production of cars if:

it has a relative abundance in the natural resources needed to produce cars.

An increase in an economy's productive resources will lead the production possibilities curve to:

shift outward.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. What is the opportunity cost to Dan of making a sandwich?

1/3 of a smoothie

Which of the following is NOT a reason why there are gains to specialization?

It increases the amount productive resources in the economy.

If country A can produce more of practically everything than can country B, then which of the following statements is true?

Trade can benefit both countries.

The United States generally has a comparative advantage in the development of technology because it has:

a disproportionate share of the world's best research universities.

The benefits of specialization can be used to explain why:

individuals and nations benefit from trade.

On a graph of a production possibilities curve, if a point is attainable, then it:

might or might not be efficient.

The slope of a production possibilities curve is ________ because ________.

negative; producing more of one good requires producing less of the other

According to the accompanying table, Martha has the absolute advantage in making:

neither pies nor cakes.

Outsourcing is a term increasingly used to refer to the act of:

replacing relatively expensive American workers with low-wage workers overseas.

The textbook notes that the last time a major league batter hit .400 was in 1941. This is because:

specialization by pitchers, infielders, and outfielders has made it harder for batters to hit.

Assume point A on a linear production possibilities curve represents the combination of 12 coffees and 3 cappuccinos, and point B represents 3 coffees and 6 cappuccinos. Suppose coffees are on the vertical axis and cappuccinos are on the horizontal axis. The absolute value of the slope of the production possibilities curve between points A and B equals:

3

Working efficiently, Jordan can write 3 essays and outline 4 chapters each week. It must be true that:

3 essays and 5 chapter outlines would be unattainable.

Refer to the accompanying table. Martha's opportunity cost of making of a pie is:

3/4 of a cake.

Refer to the accompanying table. Martha's opportunity cost of making a cake is:

4/3 of a pie.

If Al has an absolute advantage over Beth in preparing meals, then:

Al can prepare more meals in a given time period than Beth.

Which of the following statements is true?

Comparative advantage does not require absolute advantage.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

Dan has the comparative and absolute advantage in sandwiches.

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

Dan should specialize in sandwiches, and Tracy should specialize in smoothies.

If Jane can produce 3 pairs of shoes per hour, while Bob can produce 2, then ________ has a(n) ________ advantage in producing shoes.

Jane; absolute

You have noticed that your next-door neighbor, Mary, always works in the garden, and her husband, Joe, always walks the dog. You conclude that if Joe and Mary are efficient, then it must be the case that:

Joe has a comparative advantage in walking the dog.

If Les can produce two pairs of pants per hour while Eva can produce one pair per hour, then it must be true that:

Les has an absolute advantage in producing pants.

Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?

Lewis has a comparative advantage in pies, and Cathy has an absolute advantage in pies.

Refer to the accompanying table. ________ has the comparative advantage in making pies and ________ the comparative advantage in making cakes.

Martha; Julia

Ginger and Maryann are lost in the jungle, where the only things to eat are mangoes and fish. Ginger can gather more mangoes per hour than Maryann and can also catch more fish per hour than can Maryann. Therefore:

Maryann should specialize in the activity for which she has a comparative advantage.

According to the textbook, NAFTA was expected to help which country exploit its comparative advantage in the production of goods made by unskilled labor?

Mexico

Suppose it takes Paul 3 hours to bake a cake and 2 hours to mow the lawn, and suppose it takes Tom 2 hours to bake a cake and 1 hour to mow the lawn. Which of the following statements is correct?

Paul has the comparative advantage in baking cakes.

The downward slope of the production possibilities curve illustrates the:

Scarcity Principle.

Suppose that Nepal invests less in new factories and equipment than does the United States. This will likely cause:

The U.S.'s production possibilities curve to shift outward faster than Nepal's.

According to the accompanying table, Julia has the absolute advantage in making:

both pies and cakes.

If a nation can produce a more computers per year than any other nation, that nation has a(n) ________ advantage in the production of computers.

absolute

Any combination of goods that can be produced with currently available resources is an:

attainable point.

The United States was unable to maintain its dominance in the production of televisions because:

automated techniques allowed production to be outsourced to countries with less-skilled workers.

Consider a graph of a production possibilities curve. If a producer is operating at an inefficient point, then that producer:

can produce more of one good without producing less of the other good.

An individual has an absolute advantage in producing pizzas if that individual:

can produce more pizzas in a given amount of time than anyone else.

If a nation restricts imports, it will:

decrease the total value of goods and services produced in that nation.

If a country is producing at point where an increase in the production of one good requires a reduction in the production of another good, then it must be producing at an

efficient point.

Larry has a comparative advantage over his classmates in writing term papers if he:

has a lower opportunity cost of writing term papers than his classmates.

The emergence of English as the de facto world language ________ a comparative advantage

has given English-speaking countries

According to the Principle of Increasing Opportunity Cost, in expanding the production of any good, we should start by utilizing the resources that:

have the lowest opportunity cost.

The fundamental reason firms outsource is that:

hiring low-wage workers overseas reduces firms' costs.

As the differences in opportunity costs between the U.S. and its trading partners increase, the potential gains from specialization and trade ________.

increase

Suppose Karl divides his time between making birdhouses and growing artichokes. Karl's friend recently gave Karl some new woodworking tools that greatly reduced the amount of time it takes Karl to make each birdhouse, but the new tools had no impact on the amount of time it takes Karl to grow artichokes. Thus, the new tools ________ Karl's opportunity cost of growing artichokes.

increased

Suppose Colin brews beer and makes cheese. If Colin can increase his production of beer without decreasing his production of cheese, then he is producing at an:

inefficient point.

The benefits to specialization are even greater when two trading partners have:

large differences in opportunity costs.

Points that lie below the production possibilities curve are inefficient because:

more of one good could be produced without producing less of the other.

One reason there is political opposition to international trade is that:

not everyone benefits from trade.

According to the textbook, the evidence indicates that NAFTA has:

not significantly reduced the employment of unskilled workers in the United States.

Production possibilities curves for large economies are generally bow-shaped because:

opportunity costs tend to increase with increases in production.

In general, individuals and nations should specialize in producing goods ________ other individuals or nations.

or which they have a lower opportunity cost compared to

A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a:

production possibilities curve.

Regarding specialization, it is generally true that

specialization imposes costs as well as benefits.

All else equal, the jobs that are the least likely to be outsourced are those that:

require face-to-face communication.

When a U.S. firm engages in outsourcing, it benefits ________ and harms ________.

the U.S. consumers of the firm's products; the firm's U.S. employees

Generally, on a linear two-good production possibilities curve, the opportunity cost of the good measured on the vertical axis is:

the reciprocal of the opportunity cost of the good measured on the horizontal axis.

When a nation reduces the barriers to international trade:

the total value of all goods and serviced produced by the nation rises.

In a two-person, two-good economy, the gains to specialization will be larger when:

there are large differences between the individuals in their opportunity costs of producing the two goods.

Points that lie outside the production possibilities curve are ________, and points that lie inside the production possibilities curve are ________.

unattainable; attainable

One concern regarding the North American Free Trade Agreement (NAFTA) was that it would lead:

unskilled workers in the United States to lose their jobs.

The Principle of Increasing Opportunity Costs states that:

when increasing production, resources with the lowest opportunity costs should be used first.

If you have a comparative advantage in a particular task, then:

you give up less to accomplish that task than do others.