Macro test 1

People will choose to specialize and trade if they can acquire the goods they want:

at a lower cost than it would cost them to make the goods themselves.

When a producer is operating efficiently it is producing:

at a point on its production possibilities frontier.

If a wealthy nation such as the United States trades with a poorer, less developed nation like Cambodia, then it is likely true that:

both the United States and Cambodia can benefit from trading.

The production possibilities frontier:

can show all possible combinations of goods but not tell us which combination society should choose.

Suppose that only two goods are produced in an economy. If a country possesses the comparative advantage in the production of one good then it:

cannot also possess the comparative advantage in the production of the other good.

If a country possesses the absolute advantage in the production of one good:

it can produce more of that good given the same resources.

People often choose to specialize and trade because:

it will allow them to enjoy more goods than they can create on their own.

Assume that the opportunity cost for Germany to produce a jet is 50 cars. If Germany is producing on its production Possibility Frontier, some possible combinations of output for Germany could be:

(1,000 jets, 5,000 cars) and (900 jets, 10,000 cars).

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. A bundle of goods that Country A could potentially make would be:

(500 iPods, 250 tablets).

The Dominican Republic and Nicaragua both produce coffee and rum. The Dominican Republic can produce 25 thousand tons of coffee per year or 5 thousand barrels of rum. Nicaragua can produce 18 thousand tons of coffee per year or 3 thousand barrels of rum. a. Suppose the Dominican Republic and Nicaragua sign a trade agreement in which each country would specialize in the production of either coffee or rum. 1) Which country should specialize in coffee? 2) Which country should specialize in rum? b. The minimum price at which these countries will trade coffee is _______ barrel of rum per ton of coffee and the maximum price is __________ barrel of rum per ton of coffee.

1)Nicaragua 2) Dominican republic b.) .167 and .2

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. For a worker in Country A, the trade-off of making one tomato is:

5 bananas

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?

Canada has a comparative advantage in the production of shoes.

If the opportunity cost of producing corn is lower for Ohio than for Iowa, then:

Ohio has the comparative advantage in corn production.

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Which of the following statements is true?

The United States has the absolute advantage in the production of both shoes and apples.

Which of the following statements about trade is true?

Trade can benefit both parties.

The invisible hand refers to the coordination that occurs from

everyone working in his or her own self-interest.

When a producer has the ability to produce a good or service at a lower opportunity cost than others, economists say the producer:

has a comparative advantage at producing that good.

When a producer has a comparative advantage in producing a good, it means the producer:

has the ability to produce the good at a lower opportunity cost than others.

When nations trade the result would most likely be a(n):

increase in total production, which can benefit every nation involved.

The concepts of specialization and gains from trade can be applied to

international trade.

When a country is producing goods and services efficiently it:

is getting the most output by using all its available resources.

Which of the following statements about absolute and comparative advantage is not true? A country may have:

neither absolute nor comparative advantage in the production of any goods.

A production possibilities frontier is a line or curve that:

shows all the possible combinations of outputs that can be produced using all available resources.

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Country B has the comparative advantage in the production of:

tablets only

When a country loses its comparative advantage in the production of a good it:

will gain the comparative advantage in the production of another good.

If we consider the reality that each worker has different skills, then the production possibilities frontier

would display an increasing opportunity cost of a good as more of that good is produced.