CH. 2&7

All of the following are sources of comparative advantage except: A) climate and natural resources. B) relative abundance of labor and capital. C) a strong foreign currency exchange rate. D) technology.

C) a strong foreign currency exchange rate

If property rights are not well enforced, all of the following are likely to occur except: A) fewer goods and services will be produced. B) economic efficiency will be reduced. C) an economy will produce inside its production possibilities frontier. D) a significant number of people will be willing to risk their funds by investing them in local businesses.

D) a significant number of people will be willing to risk their funds by investing them in local businesses

23) If Sweden exports cell phones to Denmark and Denmark exports butter to Sweden, which of the following would explain this pattern of trade? A) Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter. B) The opportunity cost of producing butter in Denmark is higher than the opportunity cost of producing butter in Sweden. C) Sweden must have an absolute advantage in producing cell phones and Denmark must have an absolute advantage in producing butter. D) Sweden has a higher opportunity cost of producing cell phones than Denmark, and Denmark has a higher opportunity cost of producing butter.

A) Sweden has a lower opportunity cost of producing cell phones than Denmark and Denmark has a comparative advantage in producing butter.

Textbook examples of trade show how two nations both benefit from trade in goods. These examples are not completely realistic because factors of production may instead move across borders in response to differences in wages and profits. A country with a large supply of unskilled workers and relatively little capital is likely to have___ of workers and ____of investors vis-a-vis industrialized countries. A) outflows...inflows. B) inflows ...outflows. C) inflows....inflows D) outflows...outflows.

A) outflows...inflows.

In 18th century Europe, guilds limits on production increased _____ but reduced ______ and reduced total _______ A) producer surplus....consumer surplus....economic surplus B) consumer surplus...producer surplus...economic surplus C) opportunity cost... producer surplus...economic surplus D) producer surplus...opportunity cost...economic surplus

A) producer surplus....consumer surplus....economic surplus

Assume that Honduras has a comparative advantage in producing bananas and exports bananas to Brazil. We can conclude that A) Honduras also has an absolute advantage in producing bananas relative to Brazil. B) Honduras has a lower opportunity cost of producing bananas relative to Brazil. C) Brazil has an absolute disadvantage in producing bananas relative to Honduras. D) Labor costs are higher for banana producers in Brazil than in Honduras.

B) Honduras has a lower opportunity cost of producing bananas relative to Brazil

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade restrictions? A) Statistics show that trade restrictions actually do not save jobs. B) Through higher prices consumers pay a high cost for jobs saved through trade restrictions. C) Trade restrictions have a limited impact because most Americans prefer domestic goods over imports. D) Trade restrictions benefit consumers in the short run but not in the long run.

B) Through higher prices consumers pay a high cost for jobs saved through trade restrictions

China developed a comparative advantage in the production of children's toys. The source of this comparative advantage is: A) superior process technology. B) a large supply of unskilled workers and relatively little capital. C) investment in capital used to produce toys. D) a large supply of natural resources.

B) a large supply of unskilled workers and relatively little capital.

A successful market economy requires well defined property rights and: A) balanced supplies of all factors of production. B) an independent court system to adjudicate disputes based on the law. C) detailed government regulations. D) a safety net to ensure that those unable to participate in the market economy can earn an income

B) an independent court system to adjudicate disputes based on the law.

In 18th century Europe, governments gave guilds legal authority to limit production of goods. This authority reduced economic efficiency by allowing guilds to prevent from coordinating the decisions of producers and consumers. A) absolute advantage B) demand and supply C) opportunity cost D) nature

B) demand and supply

A country with a large supply of unskilled workers and relatively little capital is likely to have ____ wages and _____ profit margins than industrialized countries A) higher...lower. B) lower ...higher. C) lower....lower. D) higher...higher.

B) lower ...higher.

If Norweigan workers are more productive than Albanian workers, then trade between Norway and Albania A) cannot take place because Norwegian goods and services will be less expensive than Albanian goods and services. B) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want. C) cannot take place until Albanian workers become more productive. D) can take place only if Albania has an absolute advantage in producing a good or service Norwegian buyers want.

B) will take place so long as each country has a comparative advantage in a good or service that buyers in the other country want.

Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade. These examples are not completely realistic because: A) in the real world, rich countries can take advantage of poor countries. B) they do not account for the reduction in wages that occurs in both countries as a result of trade. C) some individuals in both countries may be made worse off because of trade. D) trade restrictions are likely to be imposed as trade grows over time.

C) some individuals in both countries may be made worse off because of trade.

The increase in unemployment in the United States that resulted from the China shock (entry of China into the World Trade Organization in 2000) A) was actually very small, as very few people lost jobs were unable to find comparable employment relatively quickly. B) was almost immediately offset by economic growth in other sectors. C) was concentrated primarily in the service sector. D) recovered at a much slower pace than it had from import increases in previous decades.

D) recovered at a much slower pace than it had from import increases in previous decades