Econ. Issues & Policies Chapter 2

In country A, the opportunity cost of 100 flash drives is 150 e-books. In country B, the opportunity cost of 100 flash drives is 70 e-books. (A) has a comparative advantage in e-book production. (A) Country A OR Country B

(A) Country A

The production possibilities frontier is (A) because, as more of a country's fixed resources are used to produce an item using the same technology, the opportunity cost of producing the item usually (B) (A) convex OR concave (B) rises OR falls

(A) concave (B) rises

When the residents of nation that possesses comparative advantages choose not to engage in international trade, this choice results in constraining (A) possibilities to the nation's individual (B) possibilities (A/B) production OR consumption

(A) consumption (B) production

As long as technology and available resources remain unchanged, as a country transfers more and more resources to the production of one good or service, the (A) of producing that good or service (B). (A) opportunity cost OR absolute advantage OR comparative advantage (B) rises OR declines

(A) opportunity cost (B) rises

If there is no international trade, then a nation's consumption possibilities are (A) its production possibilities. (A) the same as OR less than OR greater than OR steeper than

(A) the same as

The slope of a line tangent to a point along a country's production possibilities frontier measures the opportunity cost of ____. (A) sacrificing an absolute advantage for a comparative advantage (B) producing one item instead of the other

(B) producing one item instead of the other

T/F: Absolute advantage is required for residents of nations to gain from international trade.

F

T/F: After residents of two nations specialize in producing different items and engage in international trade, each country's economy's consumption possibilities are typically located at points outside their production possibilities frontiers.

F

T/F: The production possibilities frontier consists of all combinations of goods and services that a nation's residents desire to consume.

F

T/F: The slope of a line tangent to a country's production possibilities frontier measures the absolute advantage its residents possess when determining terms of trade with other nations

F

T/F: The various possible combinations of total feasible production rates for two items within a nation are called the nation's resource utilization curve

F

T/F: Trade flows between very large countries and very small countries are the result of exploitation of the small country.

F

T/F: Two countries must have production possibility frontiers that intersect in order for the two countries to potentially experience positive gains from international trade.

F

A country's overall production capabilities for a given year

production possibilities

The various possible combinations of total feasible production rates for two items within a nation are called _____

production possibilities frontier

With a given technology and fixed amounts of fully employed resources, increasing production of one good requires reducing production of another good

production possibilities trade-off

internal rearrangements of income flows among a nation's residents arising from variations in flows of international trade

re-distributive effects of trade

When engaging in international trade causes income growth to shift from people involved with one industry to people associated with another industry, this is unambiguously an example of a ____

redistributive effect of trade

T/F: If the opportunity cost of producing an additional good is always the same to residents of a nation, no matter how many units they produce, the production possibilities frontier would have to be a straight line.

T

T/F: The opportunity cost of producing an additional unit of an item typically rises as the total quantity of that item produced increases.

T

T/F: The possession of absolute advantage in the production of two different items by residents of two countries suggests that specialization and international trade can boost the two nations' combined total output.

T

T/F: The slope of a line tangent to a point on a production possibilities frontier measures the opportunity cost of producing one item in terms of the amount of the other item that must be given up

T

T/F: This frontier displays combinations of two items that can be produced with the current technology and available resources.

T

T/F: the next most highly alternative value sacrificed in order to obtain an item is the item's opportunity cost

T

the ability of a nation's residents to produce a good or service at a lower cost comparative to another country's production

absolute advantage

The ability of a nation's residents to produce a unit of a good or service at a lower opportunity cost than residents of another country is known as ____

comparative advantage

the ability of a nation's population to produce an additional unit of a good or service at a lower opportunity cost relative to other nations

comparative advantage

the amounts of goods and services that a country's population is able to consume

consumption possibilities

When a nation is able to have greater consumption possibilities with international trade than without trade, this is unambiguously a ____

gain from trade

additional goods and services that a nation's residents can consume, over and above the amounts that they could have produced, as a result of the trade

gains from trade

The alternative that must be sacrificed to obtain an item

opportunity cost

T/F: Comparative advantage is typically thought to rationalize why most international trade takes place.

T

T/F: Comparative advantage-based free trade between large and small countries can be mutually beneficial.

T

T/F: Absolute advantage is the term for the capability of a nation's residents to produce more output of a good or service utilizing a given amount of inputs than could be produced by residents of another country.

T

T/F: Comparative advantage exists when residents of one country can produce a good or service at lower opportunity cost than residents of another country.

T

The ability of a nation's residents to produce more units of an item with available resources than residents of another country produce is known as ____

absolute advantage

A country that can produce more of a good or service than another country utilizing available resources and technology is said to have ____ over the other country.

absolute advantage