Chapter 3 Quiz

Refer to Table 1. The opportunity cost of 1 unit of food in Korea is

1/2 of a unit of electronics

Refer to Table 1. The opportunity cost of 1 unit of food in Australia is

1/4 of a unit of electronics

Refer to Table 1. The opportunity cost of 1 unit of electronics in Korea is

2 units of food

Use the production possibilities frontiers in Exhibit 4 to answer the following 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 Peru is

3 tons of fruit

Refer to Table 1. The opportunity cost of 1 unit of electronics in Australia is

4 units of food

Which of the following statements is true?

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

Refer to Table 1. Which of the following statements about comparative advantage is true?

Australia has a comparative advantage in the production of food while Korea has a comparative advantage in the production of electronics

Refer to Table 1. Which of the following statements about absolute advantage is true?

Australia has an absolute advantage in the production of both food and electronics

Suppose the world consists of two countries--the United States and Mexico. Furthermore, suppose there are only two goods--food and clothing. Which of the following statements is true?

If the United States has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing

Joe is a tax accountant. He receives $100 per hour doing tax returns. He can type 10,000 characters per hour into spreadsheets. He can hire an assistant who types 2,500 characters per hour into spreadsheets. Which of the following statements is true?

Joe should hire the assistant as long as he pays the assistant less than $25 per hour

Refer to Table 1. Prices of electronics can be stated in terms of units of food. What is the range of prices of electronics for which both countries could gain from trade?

The price must be greater than 2 units of food but less than 4 units of food

Which of the following statements about trade is true?

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 Exhibit 4 to answer the following question. Assume each country has the same number of workers, say 20 million, and that each axis is measured in metric tons per month. Argentina has a comparative advantage in the production of

beef

According to the principle of comparative advantage,

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 Exhibit 4 to answer the following question. Assume each country has the same number of workers, say 20 million, and that each axis is measured in metric tons per month. Peru will export

fruit

If a nation has a comparative advantage in the production of a good,

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

If a nation has an absolute advantage in the production of a good,

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

Refer to Table 1. Korea should

specialize in electronics production, export electronics, and import food

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the domestic price

the domestic price of 1 ring is 1/3 of a watch

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, the opportunity cost

the opportunity cost of 1 watch is 3 rings