Macroeconomics 2.2 Studyguide

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 5) Refer to Table 2-4. What is Georgeȇs opportunity cost of mowing a lawn? A) half a garden cultivated B) two lawns mowed C) two-thirds of a garden cultivat

A

78) Should countries specialize in producing goods and services based on having a comparative advantage or an absolute advantage? Why?

Answer: Countries should specialize in producing products based on comparative advantage because this allows countries to produce those products and services at a lower opportunity cost than competitors.

1) If you can produce more of something than others with the same resources, you have A) a comparative advantage. B) an absolute advantage. C) an efficient production system. D) a free-market economy.

B

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 6) Refer to Table 2-4. What is Georgeȇs opportunity cost of cultivating a garden? A) half a garden cultivated B) two lawns mowed C) two-thirds of a garden cultivated D) one and a half lawns mowed

B

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 19) Refer to Table 2-5. Does either Estonia or Finland have an absolute advantage and if so, in what product? A) Finland has an absolute advantage in lumber. B) Estonia has an absolute advantage in lumber. C) Finland has an absolute advantage in both products. D) Estonia has an absolute advantage in cell phones.

C

66) If Blake can pick more cherries in one hour than Cody, then Blake has a comparative advantage in cherry picking.

FALSE

67) The basis for trade is absolute advantage, not comparative advantage.

FALSE

68) If a country produces only two goods, then it is not possible to have a comparative advantage in the production of both those goods.

TRUE

69) In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it can still benefit by trading with the other country

TRUE

72) If Abigail can make more candles in one day than Pierre, then Abigail has an absolute advantage in making candles.

TRUE

James Lucy Wagons 16 18 Tricycles 32 24 33) Refer to Table 2-6. What is Lucyȇs opportunity cost of making a tricycle? A) 3/4 of a wagon B) 3 wagons C) 1 1/3 tricycles D) 2 tricycles

A

James Lucy Wagons 16 18 Tricycles 32 24 34) Refer to Table 2-6. What is Jamesȇs opportunity cost of making a wagon? A) 2 tricycles B) 1/2 of a wagon C) 1/2 of a tricycle D) 3/4 of a wagon

A

Minnie Mickey Hats 40 50 Umbrellas 10 5 39) Refer to Table 2-7. What is Mickeyȇs opportunity cost of making a hat? A) 1/10 of an umbrella B) 1/5 of an umbrella C) 5 umbrellas D) 10 umbrellas

A

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 22) Refer to Table 2-5. What is Estoniaȇs opportunity cost of producing one board foot of lumber? A) 0.2 cell phones B) 5 cell phones C) 8 cell phones D) 32 cell phones

A

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 23) Refer to Table 2-5. What is Finlandȇs opportunity cost of producing one board foot of lumber? A) 0.25 cell phones B) 4 cell phones C) 12 cell phones D) 16 cell phones

A

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 60) Refer to Table 2-9. What is Japanȇs opportunity cost of producing one pound of rice? A) 0.04 units of a wristwatch B) 4 wristwatches C) 25 wristwatches D) 40 wristwatches

A

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 62) Refer to Table 2-9. Japan has a comparative advantage in the production of A) rice. B) wristwatches. C) both products. D) neither product.

A

Wilma Betty Statues 12 14 Benches 4 7 44) Refer to Table 2-8. What is Wilmaȇs opportunity cost of making a statue stick? A) 1/3 bench B) 3 benches C) 6/7 statue D) 1/2 bench

A

Wilma Betty Statues 12 14 Benches 4 7 46) Refer to Table 2-8. What is Bettyȇs opportunity cost of making a statue? A) 1/2 bench B) 2 benches C) 1/3 bench D) 1.4 statues

A

Cell Phone Lumber (board feet) Estonia 20 hours 5 hours Finland 18 hours 4 hours 81) Refer to Table 2-11.ȱȱThis table shows the number of labor hours required to produce a cell phone and a board foot of lumber in Estonia and Finland. a. Which country has an absolute advantage in the production of cell phones? b. Which country has an absolute advantage in the production of lumber? c. What is Estoniaȇs opportunity cost of producing one cell phone? d. What is Finlandȇs opportunity cost of producing one cell phone? e. What is Estoniaȇs opportunity cost of producing one board foot of lumber? f. What is Finlandȇs opportunity cost of producing one board foot of lumber? g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce cell phones? h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce lumber?

Answer: a. Finland has an absolute advantage in the production of cell phones. b. Finland has an absolute advantage in lumber production. c. Estoniaȇs the opportunity cost of producing one cell phone is 4 board feet of lumber. d. Finlandȇs opportunity cost of producing one cell phone is 4.5 board feet of lumber e. Estoniaȇs opportunity cost of one board foot of lumber is 0.25 units of a cell phone. f. Finlandȇs opportunity cost of one board foot of lumber is 0.22 units of a cell phone. g. Estonia should specialize in producing cell phones. h. Finland should specialize in producing lumber.

80) Suppose in Belgium, the opportunity cost of producing a trombone is 8 clarinets.ȱȱIn Denmark, the opportunity cost of producing a trombone is 6 clarinets. a. What is the opportunity cost of producing a clarinet for Belgium? b. What is the opportunity cost of producing a clarinet for Denmark? c. Which country has a comparative advantage in the production of clarinets? d. Which country has a comparative advantage in the production of trombones?

Answer: a. For Belgium, the opportunity cost of producing a clarinet is 1/8 of a trombone.ȱȱȱ b. For Denmark, the opportunity cost of producing a clarinet is 1/6 of a trombone. c. Belgium has a comparative advantage in the production of clarinets. d. Denmark has a comparative advantage in the production of trombones.

One Watch Rice bushels Japan 200 hours 10 hours Thailand 180 hours 6 hours 79) Refer to Table 2-10.ȱȱThis table shows the number of labor hours required to produce a wristwatch and a bushel of rice in Japan and Thailand. a. Which country has an absolute advantage in the production of wristwatches? b. Which country has an absolute advantage in the production of rice? c. What is Japanȇs opportunity cost of producing one wristwatch? d. What is Thailandȇs opportunity cost of producing one wristwatch? e. What is Japanȇs opportunity cost of producing one pound of rice? f. What is Thailandȇs opportunity cost of producing one pound of rice? g. If each country specializes in the production of the product in which it has a comparative advantage, who should produce wristwatches? h. If each country specializes in the production of the product in which it has a comparative advantage, who should produce rice?

Answer: a. Thailand has an absolute advantage in the production of wristwatches. b. Thailand has an absolute advantage in rice production. c. Japanȇs opportunity cost of producing one wristwatch is 20 bushels of rice. d. Thailandȇs opportunity cost of producing one wristwatch is 30 bushels of rice e. Japanȇs opportunity cost of one bushel of rice is 0.05 units of a wristwatch. f. Thailandȇs opportunity cost of one bushel of rice is 0.03 units of a wristwatch. g. Japan should specialize in producing wristwatches. h. Thailand should specialize in producing rice.

10) For each watch that Switzerland produces, it gives up the opportunity to make 50 pounds of chocolate. Germany can produce 1 watch for every 100 pounds of chocolate it produces.ȱȱWhich of the following is true about the comparative advantage between the two countries? A) Switzerland has the comparative advantage in chocolate. B) Switzerland has the comparative advantage in watches. C) Germany has the comparative advantage in watches and chocolate. D) Germany has the comparative advantage in watches.

B

18) Individuals who have never been the best at doing anything A) cannot have a comparative advantage in producing any product. B) can still have a comparative advantage in producing some product. C) perform all tasks at a higher opportunity cost than others. D) must have an absolute advantage in at least ones task

B

28) If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should A) split her time evenly between being a lawyer and a word processor. B) specialize in being a lawyer because its opportunity cost is lower. C) should pursue the activity she enjoys more. D) specialize in being a work processor because it is more capital-intensive.

B

30) As job opportunities for women and the wages those jobs pay have increased, the opportunity cost of doing housework has ________, so many families have chosen to hire specialists in households chores, such as cleaning services and lawn care services, because the cost of these specialists is ________ than the cost of the wife (or husband) performing those chores. A) increased; higher B) increased; lower C) decreased; higher D) decreased; lower

B

49) For each pound of salami that Hungary produces, it gives up the opportunity to make 10 bottles of beer. Slovakia can produce 1 pound of salami for every 8 bottles of beer it produces.ȱȱWhich of the following is true about the comparative advantage between the two countries? A) Hungary has the comparative advantage in salami. B) Hungary has the comparative advantage in beer. C) Slovakia has the comparative advantage in salami and beer. D) Slovakia has the comparative advantage in beer

B

8) Comparative advantage means A) the ability to produce more of a product with the same amount of resources than any other producer. B) the ability to produce a good or service at a lower opportunity cost than any other producer. C) the ability to produce a good or service at a higher opportunity cost than any other producer. D) compared to others you are better at producing a product.

B

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 2) Refer to Table 2-4. Which of the following statements is true? A) Jack has an absolute advantage in both tasks. B) George has an absolute advantage in both tasks. C) Jack has an absolute advantage in lawn mowing and George in garden cultivating. D) Jack has an absolute advantage in garden cultivating and George in lawn mowing.

B

James Lucy Wagons 16 18 Tricycles 32 24 35) Refer to Table 2-6. What is Jamesȇs opportunity cost of making a tricycle? A) 2 tricycles B) 1/2 of a wagon C) 1/2 of a tricycle D) 3/4 of a wagon

B

Minnie Mickey Hats 40 50 Umbrellas 10 5 38) Refer to Table 2-7. What is Minnieȇs opportunity cost of making a hat? A) 1/5 of an umbrella B) 1/4 of an umbrella C) 4 umbrellas D) 10 umbrellas

B

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 20) Refer to Table 2-5. What is Estoniaȇs opportunity cost of producing one cell phone? A) 0.2 board feet of lumber B) 5 board feet of lumber C) 8 board feet of lumber D) 32 board feet of lumber

B

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 21) Refer to Table 2-5. What is Finlandȇs opportunity cost of producing one cell phone? A) 0.25 board feet of lumber B) 4 board feet of lumber C) 12 board feet of lumber D) 16 board feet of lumber

B

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 24) Refer to Table 2-5. Estonia has a comparative advantage in the production of A) both products. B) lumber. C) cell phones. D) neither product.

B

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 26) Refer to Table 2-5. If the two countries specialize and trade, who should export lumber? A) There is no basis for trade between the two countries. B) Estonia C) Finland D) They should both be exporting lumber.

B

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 59) Refer to Table 2-9. What is Thailandȇs opportunity cost of producing one wristwatch? A) 0.05 pounds of rice B) 20 pounds of rice C) 25 pounds of rice D) 60 pounds of rice

B

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 63) Refer to Table 2-9. Thailand has a comparative advantage in the production of A) rice. B) wristwatches. C) both products. D) neither product.

B

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 64) Refer to Table 2-9. If the two countries specialize and trade, who should export rice? A) There is no basis for trade between the two countries. B) Japan C) Thailand D) They should both be exporting rice.

B

Wilma Betty Statues 12 14 Benches 4 7 43) Refer to Table 2-8. Which of the following statements is true? A) Wilma has an absolute advantage in making both products. B) Betty has an absolute advantage in making both products. C) Betty has an absolute advantage in making statues and Wilma in making benches. D) Betty has an absolute advantage in making benches and Wilma in making statues.

B

Wilma Betty Statues 12 14 Benches 4 7 45) Refer to Table 2-8. What is Wilmaȇs opportunity cost of making a bench? A) 1/3 statue B) 3 statues C) 1/2 bench D) 1.3 statues

B

Wilma Betty Statues 12 14 Benches 4 7 47) Refer to Table 2-8. What is Bettyȇs opportunity cost of making a bench? A) 1/2 statue B) 2 statues C) 1.75 benches D) 2.8 statues

B

29) Izzy Amador is a highly talented tattoo artist. She has chosen to specialize in tattoo art because of all of the following except A) her tattoos are highly esteemed by tattoo lovers who are willing to pay very high prices. B) for her, this is the most lucrative way to purchase the products that she wants to consume. C) her opportunity cost of pursuing another career is very low. D) she obviously has a comparative advantage in tattoo art.

C

9) Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following? A) never have to engage in trade with other nations B) increase the variety of products that it can produce with a decrease in resources C) consume a combination of goods that lies outside its own production possibilities frontier D) produce a combination of goods that lies outside its own production possibilities frontier

C

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 3) Refer to Table 2-4. What is Jackȇs opportunity cost of mowing a lawn? A) half a garden cultivated B) two lawns mowed C) two-thirds of a garden cultivated D) one and a half lawns mowed

C

James Lucy Wagons 16 18 Tricycles 32 24 31) Refer to Table 2-6. Which of the following statements is true? A) Lucy has an absolute advantage in making both products. B) James has an absolute advantage in making both products. C) Lucy has an absolute advantage in making wagons and James in making tricycles. D) James has an absolute advantage in making tricycles and Lucy in making wagons.

C

James Lucy Wagons 16 18 Tricycles 32 24 32) Refer to Table 2-6. What is Lucyȇs opportunity cost of making a wagon? A) 3/4 of a wagon B) 3 wagons C) 1 1/3 tricycles D) 2 tricycles

C

James Lucy Wagons 16 18 Tricycles 32 24 36) Refer to Table 2-6. Which of the following statements is true? A) Lucy has a comparative advantage in making both products. B) James has a comparative advantage in making both products. C) Lucy has a comparative advantage in making wagons and James in making tricycles. D) Lucy has a comparative advantage in making tricycles and James in making wagons.

C

Minnie Mickey Hats 40 50 Umbrellas 10 5 40) Refer to Table 2-7. What is Minnieȇs opportunity cost of making an umbrella? A) 1/10 of a hat B) 1/4 of a hat C) 4 hats D) 40 hats

C

Minnie Mickey Hats 40 50 Umbrellas 10 5 41) Refer to Table 2-7. What is Mickeyȇs opportunity cost of making an umbrella? A) 1/5 of a hat B) 5 hats C) 10 hats D) 50 hats

C

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 25) Refer to Table 2-5. Finland has a comparative advantage in the production of A) both products. B) lumber. C) cell phones. D) neither product.

C

One Cell Phone Lumber Per Board Foot Estonia 40 hours 8 hours Finland 16 hours 4 hours 27) Refer to Table 2-5. If the two countries specialize and trade, who should export cell phones? A) There is no basis for trade between the two countries. B) Estonia C) Finland D) They should both be importing cell phones.

C

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 57) Refer to Table 2-9. Does either Japan or Thailand have an absolute advantage and if so, in what product? A) Thailand has an absolute advantage in rice. B) Japan has an absolute advantage in rice. C) Thailand has an absolute advantage in both products. D) Japan has an absolute advantage in wristwatches.

C

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 58) Refer to Table 2-9. What is Japanȇs opportunity cost of producing one wristwatch? A) 0.04 pounds of rice B) 4 pounds of rice C) 25 pounds of rice D) 40 pounds of rice

C

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 65) Refer to Table 2-9. If the two countries specialize and trade, who should export wristwatches? A) There is no basis for trade between the two countries. B) Japan C) Thailand D) They should both be importing wristwatches

C

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 4) Refer to Table 2-4. What is Jackȇs opportunity cost of cultivating a garden? A) half a garden cultivated B) two lawns mowed C) two-thirds of a garden cultivated. D) one and a half lawns mowed

D

George Jack Lawns Mowed 10 6 Gardens Cultivated 5 4 7) Refer to Table 2-4. Which of the following statements is true? A) Jack has a comparative advantage in both tasks. B) George has a comparative advantage in both tasks. C) Jack has a comparative advantage in lawn mowing and George in garden cultivating. D) Jack has a comparative advantage in garden cultivating and George in lawn mowing.

D

Minnie Mickey Hats 40 50 Umbrellas 10 5 37) Refer to Table 2-7. Which of the following statements is true? A) Mickey has an absolute advantage in making both products. B) Minnie has an absolute advantage in making both products. C) Minnie has an absolute advantage in making hats and Mickey in making umbrellas. D) Minnie has an absolute advantage in making umbrellas and Mickey in making hats.

D

Minnie Mickey Hats 40 50 Umbrellas 10 5 42) Refer to Table 2-7. Which of the following statements is true? A) Minnie has a comparative advantage in making both products. B) Mickey has a comparative advantage in making both products. C) Minnie has a comparative advantage in making hats and Mickey in making umbrellas. D) Mickey has a comparative advantage in making hats and Minnie in making umbrellas.

D

One Watch Price per pound Japan 50 hours 2 hours Thailand 30 hours 1.5 hours 61) Refer to Table 2-9. What is Thailandȇs opportunity cost of producing one pound of rice? A) 60 wristwatches B) 20 wristwatches C) 5 wristwatches D) 0.05 units of a wristwatch

D

Wilma Betty Statues 12 14 Benches 4 7 48) Refer to Table 2-8. Which of the following statements is true? A) Wilma has a comparative advantage in making both products. B) Betty has a comparative advantage in making both products. C) Betty has a comparative advantage in making statues and Wilma in making benches. D) Betty has a comparative advantage in making benches and Fred in making statues.

D

70) If the opportunity cost of producing more of one good increases as more of that good is produced, then the production method is inefficient.

FALSE

71) It is not possible to have a comparative advantage in producing a good or service without having an absolute advantage.

FALSE

75) For a person to have a comparative advantage in producing a product, he must be able to produce that product at a higher opportunity cost than his competitors.

FALSE

76) It is not possible to have an absolute advantage in producing a good or service without having a comparative advantage.

FALSE

73) If a country produces only two goods, it is possible to have an absolute advantage in the production of both those goods.

TRUE

74) In a two-good, two country world, if one country has a comparative advantage in the production of one good, it can benefit by trading with other countries.

TRUE