Micro Econ Chapter 3

Refer to Figure 3-2. Ben has a comparative advantage in a. cones and Jerry has a comparative advantage in ice cream. b. ice cream and Jerry has a comparative advantage in cones. c. neither good and Jerry has a comparative advantage in both goods. d. both goods and Jerry has a comparative advantage in neither good.

a

Refer to Table 3-2. For Helen, the opportunity cost of 1 dress is a. 1/5 quilt. b. 1/4 quilt. c. 2 quilts. d. 5 quilts.

a

Refer to Table 3-2. Helen has a comparative advantage in a. dresses and Carolyn has a comparative advantage in quilts. b. quilts and Carolyn has a comparative advantage in dresses. c. neither good and Carolyn has a comparative advantage in both goods. d. both goods and Carolyn has a comparative advantage in neither good.

a

Refer to Table 3-6. England and Spain both could benefit, relative to a situation in which neither country is specializing, by England specializing in a. bread and Spain specializing in cheese. b. cheese and Spain specializing in bread. c. both goods and Spain specializing in neither good. d. neither good and Spain specializing in both goods.

a

Refer to Table 3-6. If England and Spain specialize and trade based on the principle of comparative advantage, England will export a. bread and Spain will export cheese. b. bread and Spain will export bread. c. cheese and Spain will export cheese. d. cheese and Spain will export bread.

a

Refer to Table 3-6. The opportunity cost of 1 unit of bread in Spain is a. 4 units of cheese. b. 2 units of cheese. c. 1 unit of cheese. d. 1/4 unit of cheese.

a

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is a. 5/3 bushels of corn. b. 2/5 bushel of corn. c. 5/2 bushels of corn. d. 8/5 bushels of corn.

a

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

a

A production possibilities frontier will be a straight line if a. increasing the production of one good by x units entails no opportunity cost in terms of the other good. b. increasing the production of one good by x units entails a constant opportunity cost in terms of the other good. c. the economy is producing efficiently. d. the economy is engaged in trade with at least one other economy.

b

Refer to Figure 3-2. Ben has an absolute advantage in a. ice cream and Jerry has an absolute advantage in cones. b. cones and Jerry has an absolute advantage in ice cream. c. neither good and Jerry has an absolute advantage in both goods. d. both goods and Jerry has an absolute advantage in neither good.

b

Refer to Figure 3-2. For Jerry, the opportunity cost of 1 pound of cones is a. 1/3 pound of ice cream. b. 2/3 pound of ice cream. c. 3/2 pounds of ice cream. d. 2 pounds of ice cream.

b

Refer to Figure 3-4. If Barney and Betty both specialize in the good in which they have a comparative advantage, a. total production of bread will be 7 and total production of pies will be 15. b. total production of bread will be 20 and total production of pies will be 14. c. total production of bread will be 27 and total production of pies will be 29. d. total production of bread will be 40 and total production of pies will be 22.

b

Refer to Table 3-6. England has a comparative advantage in a. bread and Spain has an absolute advantage in cheese. b. bread and Spain has an absolute advantage in neither good. c. cheese and Spain has an absolute advantage in both goods. d. both goods and Spain has an absolute advantage in cheese.

b

Refer to Table 3-6. If England and Spain specialize and trade based on the principle of comparative advantage, England will export which product to Spain? a. cheese b. bread c. both cheese and bread d. England cannot benefit from trade with Spain.

b

Refer to Table 3-6. If England and Spain specialize and trade based on the principle of comparative advantage, Spain will export which product to England? a. bread b. cheese c. both bread and cheese d. Spain cannot benefit from trade with England.

b

Refer to Table 3-6. The opportunity cost of 1 unit of bread in England is a. 4 units of cheese. b. 2 units of cheese. c. 1 unit of cheese. d. 1/2 unit of cheese.

b

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

b

Refer to Table 3-6. England has an absolute advantage in a. bread and Spain has an absolute advantage in cheese. b. cheese and Spain has an absolute advantage in bread. c. neither good and Spain has an absolute advantage in both goods. d. both goods and Spain has an absolute advantage in neither good.

d

Absolute advantage is found by comparing different producers' a. opportunity costs. b. payments to land, labor, and capital. c. input requirements per unit of output. d. locational and logistical circumstances.

c

Refer to Figure 3-2. For Jerry, the opportunity cost of 1 pound of ice cream is a. 1/3 pound of cones. b. 2/3 pound of cones. c. 3/2 pounds of cones. d. 2 pounds of cones.

c

Refer to Figure 3-2. Suppose Ben's production possibilities frontier is based on 4 hours of work. How much time does Ben require to produce 1 pound of ice cream? a. 1/2 hour b. 1 hour c. 2 hours d. The answer cannot be determined from the given information.

c

Refer to Figure 3-4. Initially, Barney is spending one-half of his time making pies and the other one-half of his time making bread, and Betty is doing the same. Relative to this initial situation, Barney and Betty could specialize according to the principle of comparative advantage, and both could benefit from this new arrangement, provided they agree that one loaf of bread will trade for somewhere between a. 1/2 pie and 3/4 pie. b. 3/4 pie and 1 pie. c. 3/4 pie and 2 pies. d. 1 pie and 1 1/2 pies.

c

Refer to Table 3-2. For Carolyn, the opportunity cost of 1 quilt is a. 0.5 dresses. b. 1 dress. c. 2 dresses. d. 3 dresses.

c

Refer to Table 3-6. If England and Spain trade based on the principle of comparative advantage, England will import a. bread and Spain will import cheese. b. bread and Spain will import bread. c. cheese and Spain will import bread. d. cheese and Spain will import cheese.

c

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is a. 0.36 bushel of corn. b. 2.4 bushels of corn. c. 2.8 bushels of corn. d. 70 bushels of corn.

c

Refer to Table 3-6. The opportunity cost of 1 unit of cheese in Spain is a. 2 unit of bread. b. 1 unit of bread. c. 1/2 unit of bread. d. 1/4 unit of bread.

d

The difference between production possibilities frontiers that are bowed out and those that are straight lines is that a. bowed-out production possibilities frontiers apply to economies that face tradeoffs, whereas straight-line production possibilities frontiers apply to economies that do not face tradeoffs. b. bowed-out production possibilities frontiers apply to economies in which resources are not specialized, whereas straight-line production possibilities frontiers apply to economies in which resources are specialized. c. bowed-out production possibilities frontiers illustrate increasing opportunity cost, whereas straight-line production possibilities frontiers illustrate constant opportunity cost. d. straight-line production possibilities frontiers illustrate real-world conditions, whereas bowed-out production possibilities frontiers illustrate more simplistic assumptions.

c

The principle of comparative advantage does not provide answers to certain questions. One of those questions is as follows: a. Do specialization and trade benefit more than one party to a trade? b. Is it absolute advantage or comparative advantage that really matters? c. How are the gains from trade shared among the parties to a trade? d. Is it possible for specialization and trade to increase total output of traded goods?

c

Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, a. the two countries' combined output of both goods will be higher than it would be in the absence of trade. b. Greece will produce more fish than it would produce in the absence of trade. c. Germany will produce more cars than it would produce in the absence of trade. d. All of the above are correct.

d

Consider a shoemaker and a vegetable farmer. Potentially, trade could benefit both individuals if a. the shoemaker can produce only shoes and the vegetable farmer can produce only vegetables. b. the shoemaker is capable of growing vegetables, but he is not very good at it. c. the vegetable farmer is better at growing vegetables and better at making shoes than the shoemaker. d. All of the above are correct.

d

Refer to Figure 3-2. For Ben, the opportunity cost of 1 pound of ice cream is a. 1/14 pound of cones. b. 1/2 pound of cones. c. 2 pounds of cones. d. 4 pound of cones.

d

Refer to Figure 3-2. Suppose Ben and Jerry have both decided to produce at point A on their respective production possibilities frontiers. We know that a. neither Ben's well-being nor Jerry's well-being could be improved as a result of trade between the two. b. trade between the two could benefit Ben but not Jerry. c. trade between the two could benefit Jerry but not Ben. d. Ben and Jerry are both allocating 1/2 of their time to the production of each good.

d

Refer to Table 3-2. For Helen, the opportunity cost of 1 quilt is a. 0.2 dresses. b. 2 dresses. c. 3.5 dresses. d. 5 dresses.

d

Refer to Table 3-6. England has an absolute advantage in a. bread and Spain has a comparative advantage in cheese. b. bread and Spain has a comparative advantage in neither good. c. cheese and Spain has a comparative advantage in both goods. d. both goods and Spain has a comparative advantage in cheese.

d

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is a. 5/3 bushels of corn. b. 2/5 bushel of corn. c. 5/2 bushels of corn. d. 8/5 bushels of corn. Which of the following statements about comparative advantage is not true? a. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. b. The principle of comparative advantage applies to countries as well as to individuals. c. Economists use the principle of comparative advantage to emphasize the potential benefits of free trade. d. A country may have a comparative advantage in producing a good, even though it lacks an absolute advantage in producing that good. Absolute advantage is found by comparing different producers' a. opportunity costs. b. payments to land, labor, and capital. c. input requirements per unit of output. d. locational and logistical circumstances. Total output in an economy increases when each person specializes because a. there is less competition for the same resources. b. each person spends more time producing that product in which he or she has a comparative advantage. c. a wider variety of products will be produced within each country due to specialization. d. government necessarily plays a larger role in the economy due to specialization. These figures illustrate the production possibilities available to Barney and Betty with 8 hours of labor in their bakery. Figure 3-4 Refer to Figure 3-4. The opportunity cost of 1 pie for Betty is a. 1/4 loaf of bread. b. 3/4 loaf of bread. c. 1 loaf of bread. d. 4/3 loaves of bread.

d

Which of the following statements is not correct? a. Trade allows for specialization. b. Trade has the potential to benefit all nations. c. Trade allows nations to consume outside of their production possibilities curves. d. Absolute advantage is the driving force of specialization.

d

True/False If it takes U.S. workers fewer hours to produce every good than it takes German workers, the United States cannot gain from trade with Germany.

f

True/False Mark is a computer company executive, earning $200 per hour managing the company and promoting its products. His daughter Regan is a high school student, earning $6 per hour helping her grandmother on the farm. Mark's computer is broken. He can repair it himself in one hour. Regan can repair it in 10 hours. Mark's opportunity cost of repairing the computer is lower than Regan's.

f

True/False The producer who has the smaller opportunity cost of producing a good is said to have an absolute advantage in producing that good.

f

True/False As long as two people have different opportunity costs, each can gain from trade, since trade allows each person to obtain a good at a price lower than his or her opportunity cost.

t

True/False Differences in opportunity cost allow for gains from trade.

t

True/False For a country producing two goods, the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

t

True/False International trade may make some individuals in a nation better off, while other individuals are made worse off.

t

True/False Trade allows a country to consume outside its production possibilities frontier.

t