AP Micro Exam review Comparative advantage MC
Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Sylvania will now be able to consume a maximum of a. 30 units of corn and 30 units of wheat. b. 40 units of corn and 30 units of wheat. c. 40 units of corn and 20 units of wheat. d. 10 units of corn and 40 units of wheat.
A
Suppose that a worker in Radioland can produce either 4 radios or 1 television per year and a worker in Teeveeland can produce either 2 radios or 5 televisions per year. Each nation has 100 workers, and each country specializes according to the principle of comparative advantage. If Radioland trades 100 radios to Teeveeland in exchange for 100 televisions each year, then each country's maximum consumption of new radios and televisions per year will be a. higher than it would be in the absence of trade because of the gains from trade. b. the same as it would be in the absence of trade. c. less than it would be in the absence of trade because neither country is specializing in the product in which it has a comparative advantage. d. less than it would be in the absence of trade because Teeveeland has an absolute advantage in both goods and so it cannot benefit by trading with Radioland.
A
Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Freedonia will now be able to consume a maximum of a. 30 units of corn and 30 units of wheat. b. 40 units of corn and 30 units of wheat. c. 40 units of corn and 20 units of wheat. d. 10 units of corn and 40 units of wheat.
A (STUDY)
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, then 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
The principle of comparative advantage does not provide answers to certain questions. One of those questions is a. Is it possible for specialization and trade to benefit more than one party to a trade? b. Is it possible for specialization and trade to increase total output of traded goods? c. Do opportunity costs play a role in people's decisions to specialize in certain activities? d. What determines the price at which trade takes place?
D
Which of the following is not correct? a. The producer who requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good. b. The producer who gives up less of other goods to produce Good X has the smaller opportunity cost of producing Good X. c. The producer who has the smaller opportunity cost of producing a good is said to have a comparative advantage in producing that good . d. The gains from specialization and trade are based not on comparative advantage but on absolute advantage.
D
Specialization and trade are closely linked to a. absolute advantage. b. comparative advantage. c. gains to some traders that exactly offset losses to other traders. d. shrinkage of the economic pie.
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
Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is true? a. Both countries could gain from trade with each other. b. Neither country could gain from trade with each other because Cornland has an absolute advantage in both goods. c. Neither country could gain from trade with each other because neither one has a comparative advantage. d. Oatland could gain from trade between the two countries, but Cornland definitively would lose.
c
When each person specializes in producing the good in which he or she has a comparative advantage, total production in the economy a. falls. b. stays the same. c. rises. d. may fall, rise, or stay the same.
c
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