Macroeconomics Chapter 9
Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. The opportunity cost of producing 1 orange for Alpha and Beta, respectively, are:
0.5 apples; 0.25 apples.
Alternate Outputs from One Day's Labor Input: USA: 12 bushels of wheat or 3 yards of textiles. India: 3 bushels of wheat or 12 yards of textiles. The opportunity cost of one bushel of wheat in India is:
4 yards of textiles.
Suppose that Canada can produce 100,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek, while Germany can produce 90,000 hockey sticks or 10,000 gallons of maple syrup in a typical workweek. From these numbers, we can conclude:
Canada has a comparative advantage in the production of hockey sticks.
Which of the following is true? A. A nation can have a comparative advantage in the production of a good only if it also has an absolute advantage. B. A nation can have a comparative advantage in the production of every good, but not an absolute advantage. C. A nation cannot have an absolute advantage in the production of every good. D. A nation cannot have a comparative advantage in the production of every good.
D
Say that Alland can produce 32 units of food per person per year or 16 units of clothing per person per year, but Georgeland can produce 16 units of food per year or 10 units of clothing. Which of the following is true?
Georgeland has a comparative advantage, but not an absolute advantage, in producing clothing.
In India one person can produce 330 pounds of rice or 110 shirts in one year. In China one person can produce 400 pounds of rice or 200 shirts in one year. Which of the following statements is true?
India has a comparative advantage in the production of rice.
If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:
The USA specializes in potatoes because of its comparative advantage in producing potatoes.
Jethro has a(n) _________ in all aspects of camping: he is faster at carrying a backpack, gathering firewood, paddling a canoe, setting up tents, making a meal, and washing up
absolute advantage
When one nation can produce a product at lower cost relative to another nation, it is said to have a(n) __________ in producing that product.
absolute advantage
Colombia produces coffee with less labor and land than any other country; it therefore necessarily has:
an absolute advantage in coffee production
When nations increase production in their area of _______ and trade with each other, both sides can benefit.
comparative advantage
_____________ identifies the area where a producer's absolute advantage is relatively greatest, or where the producer's absolute disadvantage in productivity is relatively least.
comparative advantage
Alternate Outputs from One Day's Labor Input: USA, 12 bushels of wheat or 3 yards of textiles; India, 3 bushels of wheat or 12 yards of textiles. From the data, the USA:
has an absolute advantage over India in the production of wheat.
According to international trade theory, a country should:
import goods in which it has a comparative disadvantage.
The idea behind comparative advantage reflects the possibility that one party:
may be able to produce something at a lower opportunity cost than another party.
The slope of the production possibility frontier is determined by the ____ of expanding production of one good, measured by how much of the other good would be lost.
opportunity cost
The theory of comparative advantage shows that the gains from international trade do not just result from the absolute advantage of producing at lower cost, but also from pursuing comparative advantage and producing at a lower ______
opportunity cost
The underlying reason why trade benefits both sides of a trading arrangement is rooted in the concept of __________________.
opportunity cost
