Chapter 3 Microeconomics

Which of the following statements about comparative advantage is true? a. Germany has a comparative advantage in the production of wheat, while Poland has a comparative advantage in the production of computers. b. Poland has a comparative advantage in the production of wheat, while Germany has a comparative advantage in the production of computers. c. Germany has a comparative advantage in the production of both wheat and computers. d. Poland has a comparative advantage in the production of both wheat and computers. e. Neither country has a comparative advantage.

a. Germany has a comparative advantage in the production of wheat, while Poland has a comparative advantage in the production of computers.

Prices of computers can be stated in terms of units of wheat. What is the range of prices of computers for which both countries could gain from trade? a. The price must be greater than 2 units of wheat but less than 4 units of wheat. b. The price must be greater than 1/4 of a unit of wheat but less than 1/2 of a unit of wheat. c. The price must be greater than 1/5 of a unit of wheat but less than 1/4 of a unit of wheat. d. The price must be greater than 4 units of wheat but less than 5 units of wheat.

a. The price must be greater than 2 units of wheat but less than 4 units of wheat.

If a nation has a comparative advantage in the production of a good, ________. a. it can produce that good at a lower opportunity cost than its trading partner b. it can produce that good using fewer resources than its trading partner c. it can benefit by restricting imports of that good d. it must be the only country with the ability to produce that good e. none of the answer choices are correct

a. it can produce that good at a lower opportunity cost than its trading partner

The opportunity cost of 1 unit of computers in Germany is ________. a. 1/5 of a unit of wheat b. 4 units of wheat c. 5 units of wheat d. 1/4 of a unit of wheat

b. 4 units of wheat

Suppose the world consists of two countries— Canada and Mexico. Furthermore, suppose there are only two goods—food and clothing. Which of the following statements is true? a. If Canada has an absolute advantage in the production of food, then Mexico must have an absolute advantage in the production of clothing. b. If Canada has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing. c. If Canada has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing. d. If Canada has a comparative advantage in the production of food, Mexico might also have a comparative advantage in the production of food. e. None of the answer choices are correct.

b. If Canada has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing.

According to the principle of comparative advantage, ________. a. countries should specialize in the production of goods for which they use fewer resources in production than their trading partners b. countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners c. countries should specialize in the production of goods that they enjoy consuming d. countries with a comparative advantage in the production of every good need not specialize

b. countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners

Use the production possibilities frontiers in the exhibit to answer the question. Assume each country has the same number of workers, say 20 million, and that each axis is measured in metric tons per month. Colombia will export ________. a. both fruit and beef b. fruit c. beef d. neither fruit nor beef

b. fruit

If a nation has an absolute advantage in the production of a good, ________. a. it can produce that good at a lower opportunity cost than its trading partner b. it can produce that good using fewer resources than its trading partner c. it can benefit by restricting imports of that good d. it will specialize in the production of that good and export it e. none of the answer choices are correct

b. it can produce that good using fewer resources than its trading partner

Poland should ________. a. specialize in wheat production, export wheat, and import computers b. specialize in computers production, export computers, and import wheat c. produce both goods because neither country has a comparative advantage d. produce neither good because it has an absolute disadvantage in the production of both goods

b. specialize in computers production, export computers, and import wheat

The opportunity cost of 1 unit of wheat in Germany is ________. a. 4 units of computers b. 5 units of computers c. 1/4 of a unit of computers d. 1/5 of a unit of computers

c. 1/4 of a unit of computers

The opportunity cost of 1 unit of computers in Poland is ________. a. 1/4 of a unit of wheat b. 4 units of wheat c. 2 units of wheat d. 1/2 of a unit of wheat

c. 2 units of wheat

Which of the following statements is true? a. Only countries with an absolute advantage in the production of every good should strive to be self-sufficient. b. Self-sufficiency is the road to prosperity for most countries. c. A self-sufficient country at best can consume on its production possibilities frontier. d. A self-sufficient country consumes outside its production possibilities frontier.

c. A self-sufficient country at best can consume on its production possibilities frontier.

Which of the following statements about absolute advantage is true? a. Poland has an absolute advantage in the production of both wheat and computers. b. Poland has an absolute advantage in the production of wheat while Germany has an absolute advantage in the production of computers. c. Germany has an absolute advantage in the production of both wheat and computers. d. Germany has an absolute advantage in the production of wheat while Poland has an absolute advantage in the production of computers.

c. Germany has an absolute advantage in the production of both wheat and computers.

Shahina is a tax accountant. She receives $100 per hour doing tax returns. She can type 10,000 characters per hour into spreadsheets. She can hire an assistant who types 2,500 characters per hour into spreadsheets. Which of the following statements is true? a. Shahina should not hire an assistant because the assistant cannot type as fast as she can. b. Shahina should hire the assistant as long as she pays the assistant less than $100 per hour. c. Shahina should hire the assistant as long as she pays the assistant less than $25 per hour. d. None of the answer choices are correct.

c. Shahina should hire the assistant as long as she pays the assistant less than $25 per hour.

Which of the following statements about trade is true? a. Unrestricted international trade benefits every person in a country equally. b. Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage. c. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage. d. People that are skilled at all activities cannot benefit from trade.

c. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

Use the production possibilities frontiers in the Exhibit to answer the question. Assume each country has the same number of workers, say 20 million, and that each axis is measured in metric tons per month. Brazil has a comparative advantage in the production of ________. a. both fruit and beef b. fruit c. beef d. neither fruit nor beef

c. beef

The opportunity cost of 1 unit of wheat in Poland is ________. a. 4 units of computers b. 1/4 of a unit of computers c. 2 units of computers d. 1/2 of a unit of computers

d. 1/2 of a unit of computers

Use the production possibilities frontiers in the exhibit to answer the question. Assume each country has the same number of workers, say 20 million, and that each axis is measured in metric tons per month. The opportunity cost of producing 1 metric ton of beef in Colombia is ________. a. 1/3 ton of fruit b. 1 ton of fruit c. 2 tons of fruit d. 3 tons of fruit e. 6 tons of fruit

d. 3 tons of fruit

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________. a. the domestic price of 1 pencil is 1/4 of a pen b. the domestic price of 1 pencil is 4 pens c. the domestic price of 1 pencil is 12 pens d. the domestic price of 1 pencil is 3 pens e. the domestic price of 1 pencil is 1/3 of a pen

e. the domestic price of 1 pencil is 1/3 of a pen

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________. a. the opportunity cost of 1 pen is 1/3 of a pencil b. the opportunity cost of 1 pen is 1/4 of a pencil c. the opportunity cost of 1 pen is 4 pencils d. the opportunity cost of 1 pen is 12 pencils e. the opportunity cost of 1 pen is 3 pencils

e. the opportunity cost of 1 pen is 3 pencils