CH 2: Scarcity and the World of Trade-Offs (dynamic study module)

The ability of an individual, firm, or country to produce more of a good or service than competitors using the same amount of resources known as:

absolute advantage

According to the theory of comparative advantage, specialization and free trade will benefit: only those countries that have a monopoly in a particular resource only the trading party with an absolute advantage in the production of a good all trading partners who specialize in good where they have comparative advantage only the party that specializes the most

all trading partners who specialize in good where they have comparative advantage

Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

The factors of production include land, labor, and:

capital

The global trend towards large multinational firms is partially driven by: the zero sum game protectionism comparative advantage

comparative advantage

Countries gain from specializing in producing goods in which they have a(n) __________ advantage and trading for goods in which other countries have a(n) __________ advantage.

comparative, comparative

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon? combining production steps increasing the factory size division of labor

division of labor

If a country has a comparative advantage in the production of a good, then that country: has an absolute advantage in producing that good should allow another country to specialize in the production of that good has a lower opportunity cost in the production of that good

has a lower opportunity cost in the production of that good

If a country has a comparative advantage in the production of a good, then that country: should allow another country to specialize in the production of that good has a lower opportunity cost in the production of that good has an absolute advantage in the production of that good

has a lower opportunity cost in the production of that good

The resources provided by nature and used to produce goods and services are also known as:

natural resources

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

opportunity cost

When nations specialize in their comparative advantage and engage in trade:

overall standards of living increase

The stock of computers, factory buildings and machine tools used to produce goods is known as:

physical capital

The principle of opportunity cost evolves from the concept of:

scarcity

The role of an entrepreneur always involves:

taking risks

Which of the following is not a possible opportunity cost of attending college? backpacking across europe instead of attending college starting a business instead of attending college the cost of housing wages you could have made instead of attending class and studying

the cost of housing

You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor can, which of the following is true? (you have a ______ advantage in picking apples)

you have a comparative advantage in picking apples

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _____ the payoff to devoting additional resources to that activity.

smaller