CH 3

An economy's production possibilities frontier is also its consumption possibilities frontier under all circumstances. under no circumstances. when the economy is self-sufficient. when the rate of tradeoff between the two goods being produced is constant.

when the economy is self-sufficient.

Suppose a gardener produces both tomatoes and squash in his garden. If he must give up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1 bushel of tomatoes is 0.63 bushels of squash. 1.6 bushels of squash. 3 bushels of squash. 5 bushels of squash.

1.6 bushels of squash.

Refer to Figure 3-2. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one cashew? 1/10 hour 1/3 hour 3 hours 10 hours

1/10 hour

Refer to Figure 3-2. If the production possibilities frontier shown is for 24 hours of production, then how long does it take Brazil to make one peanut? 1/10 hour 1/3 hour 3 hours 10 hours

3 hours

Refer to Figure 3-2. If the production possibilities frontier shown is for two months of production, then which of the following combinations of peanuts and cashews could Brazil produce in two months? 7 peanuts and 35 cashews 5 peanuts and 100 cashews 2 peanuts and 190 cashews 3 peanuts and 150 cashews

3 peanuts and 150 cashews

Refer to Figure 3-2. If the production possibilities frontier shown is for two months of production, then which of the following combinations of peanuts and cashews could Brazil not produce in two months? 5 peanuts and 88 cashews 4 peanuts and 115 cashews 3 peanuts and 155 cashews 1 peanuts and 200 cashews

3 peanuts and 155 cashews

Suppose a gardener produces both tomatoes and squash in his garden. If the opportunity cost of one bushel of squash is 2/5 bushel of tomatoes, then the opportunity cost of 1 bushel of tomatoes is 2/5 bushel of squash. 5/2 bushels of squash. 2 bushels of squash. 5 bushels of squash.

5/2 bushels of squash.

Abby bakes brownies and Liam grows flowers. In which of the following cases is it impossible for both Abby and Liam to benefit from trade? Abby does not like flowers and Liam does not like brownies. Abby is better than Liam at baking brownies and Liam is better than Abby at growing flowers. Liam is better than Abby at baking brownies and at growing flowers. Both Abby and Liam can benefit from trade in all of the above cases.

Abby does not like flowers and Liam does not like brownies.

Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake and eat corn. In which of the following cases is it impossible for both Olivia and Andrew to benefit from trade? Olivia cannot grow corn and Andrew cannot bake cakes. Olivia is better than Andrew at baking cakes and Andrew is better than Olivia at growing corn. Olivia is better than Andrew at baking cakes and at growing corn. Both Olivia and Andrew can benefit from trade in all of the above cases.

Both Olivia and Andrew can benefit from trade in all of the above cases.

Which of the following statements about comparative advantage is not true? Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. The principle of comparative advantage applies to countries as well as to individuals. Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good.

Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources.

The principle of comparative advantage does not provide answers to certain questions. One of those questions is Do specialization and trade benefit more than one party to a trade? Is it absolute advantage or comparative advantage that really matters? How are the gains from trade shared among the parties to a trade? Is it possible for specialization and trade to increase total output of traded goods?

How are the gains from trade shared among the parties to a trade?

Consider two individuals — Howard and Mai — each of whom would like to wear sweaters and eat tasty food. The gains from trade between Howard and Mai are least obvious in which of the following cases? Howard is very good at knitting sweaters and at cooking tasty food, but Mai's skills in both of these activities are very poor. Howard is very good at knitting sweaters and at cooking tasty food; Mai is very good at knitting sweaters, but she knows nothing about cooking tasty food. Howard's skills in knitting sweaters are fairly good, but his skills in cooking tasty food are fairly bad; Mai's skills in knitting sweaters are fairly bad, but her skills in cooking tasty food are fairly good. Howard's skills are such that he can produce only sweaters, and Mai's skills are such that she can produce only tasty food.

Howard is very good at knitting sweaters and at cooking tasty food, but Mai's skills in both of these activities are very poor.

If Korea is capable of producing either shoes or soccer balls or some combination of the two, then Korea should specialize in the product in which it has an absolute advantage. it would be impossible for Korea to have an absolute advantage over another country in both products. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Consider two individuals — Marquis and Serena — each of whom would like to wear sweaters and eat tasty food. The gains from trade between Marquis and Serena are most obvious in which of the following cases? Marquis is very good at knitting sweaters and at cooking tasty food, but Serena's skills in both of these activities are very poor. Marquis and Serena both are very good at cooking tasty food, but neither has the necessary skills to knit a sweater. Marquis's cooking and knitting skills are very poor, and Serena's cooking and knitting skills are also very poor. Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food.

Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food.

Two individuals engage in the same two productive activities. In which of the following circumstances would neither individual have a comparative advantage in either activity? One individual's production possibilities frontier is steeper than the other individual's production possibilities frontier. One individual is faster at both activities than the other individual. One individual's opportunity costs are the same as the other individual's opportunity costs. None of the above is correct; one of the two individuals always will have a comparative advantage in at least one of the two activities.

One individual's opportunity costs are the same as the other individual's opportunity costs.

Which of the following is not correct? The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good. The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

The gains from specialization and trade are based not on comparative advantage but on absolute advantage.

The principle of comparative advantage does not provide answers to certain questions. One of those questions is Is it possible for specialization and trade to benefit more than one party to a trade? Is it possible for specialization and trade to increase total output of traded goods? Do opportunity costs play a role in people's decisions to specialize in certain activities? What determines the price at which trade takes place?

What determines the price at which trade takes place?

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could benefit both Steve and Tom. benefit Steve, but not Tom. benefit Tom, but not Steve. benefit neither Steve nor Tom.

benefit both Steve and Tom.

Specialization and trade are closely linked to absolute advantage. comparative advantage. gains to some traders that exactly offset losses to other traders. shrinkage of the economic pie.

comparative advantage.

Total output in an economy increases when each person specializes because there is less competition for the same resources. each person spends more time producing that product in which he or she has a comparative advantage. a wider variety of products will be produced within each country due to specialization. government necessarily plays a larger role in the economy due to specialization.

each person spends more time producing that product in which he or she has a comparative advantage.

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that if he devotes all of his available resources to watermelon production, then he can produce 80 watermelons. he cannot have a comparative advantage over other farmers in producing cantaloupes. his opportunity cost of one watermelon is 2/3 of a cantaloupe. his production possibilities frontier is bowed-out.

his opportunity cost of one watermelon is 2/3 of a cantaloupe.

A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other information, it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton is equal to 0. is between 0 and 1. is equal to 1. is greater than 1.

is equal to 1.

When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy falls. stays the same. rises. may fall, rise, or stay the same

rises.

The production possibilities frontier illustrates the combinations of output that an economy should produce. the combinations of output that an economy should consume. the combinations of output that an economy can produce. All of the above are correct.

the combinations of output that an economy can produce.

The opportunity cost of an item is the number of hours that one must work in order to buy one unit of the item. what you give up to get that item. always less than the dollar value of the item. always greater than the cost of producing the item.

what you give up to get that item.

A production possibilities frontier is bowed outward when the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. an economy is self-sufficient instead of interdependent and engaged in trade. the rate of tradeoff between the two goods being produced is constant. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

A production possibilities frontier is a straight line when the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. an economy is interdependent and engaged in trade instead of self-sufficient. the rate of tradeoff between the two goods being produced is constant. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

the rate of tradeoff between the two goods being produced is constant.