Chapter 2.2

_____ is the ability to make something using fewer resources than other producers use.

Absolute advantage

Which of the following is true of absolute advantage?

Absolute advantage focuses on the use of fewer resources.

_____ involves the direct exchange of one good for another without the use of money.

Barter

Charles and Madeline run an event management business in which they have two major tasks: getting new clients and preparing food for the events. Charles takes 6 hours to prepare food for an event and 3 hours to get a new client. Madeline takes 12 hours to prepare food and 3 hours to get a new client. Which of the following is true?

Charles has an absolute and a comparative advantage in preparing food.

We can say that a firm is practicing division of labor if:

Each worker in the firm performs a particular task in the production process.

Which of the following is an advantage of specialization of laborers?

It allows workers to develop more experience at a particular task.

Suppose both John and Bill can do two tasks in a day. If John can do each of the two tasks faster than Bill, then:

John should specialize in performing the task for which he has a comparative advantage.

When you specialize in a task that you do best, you are applying the:

Law of comparative advantage.

The total production of goods and services in the world economy will increase if:

Nations trade and specialize in the production of a good in which they have a comparative advantage.

Ralph and Sue perform two tasks: making soccer balls and sewing cotton shirts. With the given resources, Ralph can make 20 soccer balls or sew 6 shirts and Sue can make 16 balls or sew 10 shirts. Which of the following is true?

Ralph should specialize in the production of soccer balls.

Which of the following is true of specialization and exchange?

Specialization and exchange create more interdependence in an economy.

The law of comparative advantage states that

The individual, firm, region, or country with the lower opportunity cost of producing a particular good should specialize in producing that good.

Division of labor refers to:

The process of breaking down the production of a good into separate tasks.

Charles and Madeline run an event management business in which they have two major tasks: getting new clients and preparing food for the events. Charles takes 6 hours to prepare food for an event and 3 hours to get each new client. Madeline takes 12 hours to prepare food and 3 hours to get a new client. Charles and Madeline were initially splitting both tasks for a large number of events. However, they later decide to start reassigning work based on the principle of comparative advantage. Charles takes over food preparation while Madeline uses the free time to get more clients. Which of the following is a possible effect of specialization on the tasks performed by Charles and Madeline?

The total number of events for which food is prepared will remain unchanged, but the number of new clients will increase by 2.

Suppose, in an hour, you can either make 20 tortillas or word-process 5 pages of text and your roommate can either make 15 tortillas or word-process 15 pages of text. Which of the following is correct?

Your comparative advantage is in making tortillas.