Econ QUIZ 1 (practice set 2)

Refer to Table 1. Aruba's opportunity cost of one cooler is a. 0.4 radio and Iceland's opportunity cost of one cooler is 0.25 radio. b. 0.4 radio and Iceland's opportunity cost of one cooler is 4 radios. c. 2.5 radios and Iceland's opportunity cost of one cooler is 0.25 radio. d. 2.5 radios and Iceland's opportunity cost of one cooler is 4 radios.

a. 0.4 radio and Iceland's opportunity cost of one cooler is 0.25 radio.

Refer to Table 1. Assume that Aruba and Iceland each has 80 labor hours available. Originally, each country divided its time equally between the production of coolers and radios. Now, each country spends all its time producing the good in which it has a comparative advantage. As a result, the total output of coolers increased by a. 20. b. 40. c. 60. d. 80.

a. 20.

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then a. Iowa has a comparative advantage in the production of corn. b. Iowa has an absolute advantage in the production of corn. c. Iowa should import corn from Oklahoma. d. Oklahoma should produce just enough corn to satisfy its own residents' demands.

a. Iowa has a comparative advantage in the production of corn.

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, while Sandy can make 6 tables or 18 chairs. Given this, we know that a. Mike has an absolute advantage in chairs. b. Mike has a comparative advantage in tables. c. Sandy has an absolute advantage in chairs. d. Sandy has a comparative advantage in chairs.

a. Mike has an absolute advantage in chairs.

Refer to Figure 1. If the production possibilities frontier shown for Perry is for 6 months of writing, then how long does it take Perry to write one poem? a. 1/3 month b. 1/2 month c. 2 months d. 3 months

b. 1/2 month

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is a. 0.36 bushel of corn. b. 2.8 bushels of corn. c. 14 bushels of corn. d. 70 bushels of corn.

b. 2.8 bushels of corn.

Refer to Table 1. Aruba should specialize in the production of a. coolers and Iceland should specialize in the production of radios. b. radios and Iceland should specialize in the production of coolers. c. both goods and Iceland should specialize in the production of neither good. d. neither good and Iceland should specialize in the production of both goods.

b. radios and Iceland should specialize in the production of coolers.

Refer to Table 1. Aruba should export a. coolers and import radios. b. radios and import coolers. c. both goods and import neither good. d. neither good and import both goods.

b. radios and import coolers

Refer to Table 1. Assume that Aruba and Iceland each has 80 labor hours available. If each country divides its time equally between the production of coolers and radios, then total production is a. 28 coolers and 50 radios. b. 30 coolers and 9 radios. c. 60 coolers and 18 radios. d. 120 coolers and 36 radios.

c. 60 coolers and 18 radios.

Absolute advantage is found by comparing different producers' a. opportunity costs. b. payments to land, labor, and capital. c. input requirements per unit of output. d. locational and logistical circumstances.

c. input requirements per unit of output.

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

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

Refer to Figure 1. If Jordan must work 3 months to write each novel, then her production possibilities frontier is based on how many months of work? a. 1 month b. 3 months c. 4 months d. 12 months

d. 12 months

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 30 workers in each country. No trade occurs between the two countries. Boatland produces and consumes 75 units of wheat and 375 units of fish while Farmland produces and consumes 375 units of wheat and 75 units of fish per year. If trade happens, Boatland would trade 90 units of fish to Farmland in exchange for 80 units of wheat. If Boatland now completely specializes in fish production, how many units of fish could it now consume along with the 80 units of imported wheat? a. 490 units b. 500 units c. 610 units d. 660 units

d. 660 units

Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then a. the two countries' combined output of both goods will be higher than it would be in the absence of trade. b. Greece will produce more fish than it would produce in the absence of trade. c. Germany will produce more cars than it would produce in the absence of trade. d. All of the above are correct.

d. All of the above are correct.

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible? a. Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks. b. Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks. c. Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats. d. Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.

d. Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.

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

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

When a country has a comparative advantage in producing a certain good, a. the country should import that good. b. the country should produce just enough of that good for its own consumption. c. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good. d. None of the above is correct

d. None of the above is correct

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

d. 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 a. Is it possible for specialization and trade to benefit more than one party to a trade? b. Is it possible for specialization and trade to increase total output of traded goods? c. Do opportunity costs play a role in people's decisions to specialize in certain activities? d. What determines the price at which trade takes place?

d. What determines the price at which trade takes place?

Refer to Table 1. Aruba has an absolute advantage in the production of a. coolers and Iceland has an absolute advantage in the production of radios. b. radios and Iceland has an absolute advantage in the production of coolers. c. both goods and Iceland has an absolute advantage in the production of neither good. d. neither good and Iceland has an absolute advantage in the production of both goods.

d. neither good and Iceland has an absolute advantage in the production of both goods.