Macroeconomics Chapter 3

refer to Table 3-11. At which of the following prices would both Jamaica and Norway gain from trade with each other? a. 1 radio for 4 coolers b. 1 radio for 1 cooler c. 1 radio for 10 coolers d. 1 radio for 15 coolers

a. 1 radio for 4 coolers

Refer to Figure 3-3. If the production possibilities frontier shown for Arturo is for 100 hours of production, then how long does it take Arturo to make one burrito? a. 1/3 hour b. 3 hours c. 1/4 hour d. 4 hours

a. 1/3 hour

Refer to Figure 3-3. If Arturo and Dina each divides his/her time equally between the production of tacos and burritos, then total production is a. 400 tacos and 250 burritos. b. 400 tacos and 300 burritos. c. 800 tacos and 500 burritos. d. 200 tacos and 150 burritos.

a. 400 tacos and 250 burritos.

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

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

Trade between countries a. allows each country to consume at a point outside its production possibilities frontier. b. limits a country's ability to produce goods and services on its own. c. must benefit both countries equally; otherwise, trade is not mutually beneficial. d. can best be understood by examining the countries' absolute advantages.

a. allows each country to consume at a point outside its production possibilities frontier.

What must be given up to obtain an item is called a. opportunity cost. b. absolute value. c. comparative worth. d. out-of-pocket cost.

a. opportunity cost.

When a country has a comparative advantage in producing a certain good, a. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier . b. the country should produce just enough of that good for its own consumption. c. the country should import that good. d. the country's opportunity cost of that good is high relative to other countries' opportunity costs of that same good.

a. then specializing in the production of that good and trading for other goods could allow that country to consume at a point beyond its production possibilities frontier .

Assume that Max and Min can switch between producing mittens and producing hats at a constant rate. Refer to Table 3-6. Which of the following points would not be on Max's production possibilities frontier, based on a 36-hour production period? a. (18 mittens, 0 hats) b. (2 mittens, 6 hats) c. (12 mittens, 2 hats) d. (6 mittens, 4 hats)

b. (2 mittens, 6 hats)

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is a. 1/6 tables for Ken and 3 tables for Traci. b. 1/6 tables for Ken and 1/3 tables for Traci. c. 6 tables for Ken and 3 tables for Traci. d. 6 tables for Ken and 1/3 tables for Traci.

b. 1/6 tables for Ken and 1/3 tables for Traci.

Refer to Table 3-3. 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. 60 coolers and 18 radios. c. 120 coolers and 36 radios. d. 30 coolers and 9 radios.

b. 60 coolers and 18 radios.

Refer to Figure 3-4. If point A represents Alice's current production and point B represents Betty's current production, under what circumstances can both Alice and Betty benefit from specialization and trade? a. Alice produces more pizzas and Betty produces more lemonade. b. Alice produces more lemonade and Betty produces more pizzas. c. There are no circumstances under which both Alice and Betty can benefit from specialization and trade. d. Both Alice and Betty produce only pizzas.

b. Alice produces more lemonade and Betty produces more pizzas.

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? a. Marquis is very good at knitting sweaters and at cooking tasty food, but Serena's skills in both of these activities are very poor. b. Marquis's skills are such that he can produce only sweaters, and Serena's skills are such that she can produce only tasty food. c. Marquis and Serena both are very good at cooking tasty food, but neither has the necessary skills to knit a sweater. d. Marquis's cooking and knitting skills are very poor, and Serena's cooking and knitting skills are also very poor.

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

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

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

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

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

Trade can make everybody better off because it a. requires some workers in an economy to be retrained. b. reduces competition among domestic companies. c. allows people to specialize according to comparative advantage. d. increases cooperation among nations.

c. allows people to specialize according to comparative advantage.

The most obvious benefit of specialization and trade is that they allow us to a. consume more goods by forcing people in other countries to consume fewer goods. b. spend more money on goods that are beneficial to society, and less money on goods that are harmful to society. c. consume more goods than we otherwise would be able to consume. d. work more hours per week than we otherwise would be able to work.

c. consume more goods than we otherwise would be able to consume.

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good, a. has a low opportunity cost of producing that good, relative to the opportunity costs of other producers. b. should be the only producer of that good. c. has an absolute advantage in the production of that good. d. has a comparative advantage in the production of that good.

c. has an absolute advantage in the production of that good.

Refer to Table 3-7. The number of minutes needed by Barb to test a computer is a. 48. b. 64. c. 36. d. 60.

d. 60.

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

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

Refer to Figure 3-4. Both Alice and Betty a. would benefit from specializing in lemonade production. b. would benefit from specializing in pizza production. c. can produce more pizzas than pitchers of lemonade if they devote all of their time to pizza production. d. face a constant trade-off between producing pitchers of lemonade and pizzas.

d. face a constant trade-off between producing pitchers of lemonade and pizzas.