Chapter 4: Gains from Trade
An athletic person picks fruit, and their sociable friend sells the fruit. This is an example of A. division of labor. B. specialization. C. interdependence. D. absolute advantage.
A
How does trade increase the value of goods? A. Trade moves goods from people who value them less, to people who value them more. B. Trade creates a less competitive economy, which causes the value of goods to increase. C. Trade increases the prices of goods, which simultaneously increases these goods' value. D. Trade decreases the production cost of goods, causing buyers to value them more highly.
A
Susan can score seven goals, where as Rob can score five. Susan has A. an absolute advantage. B. a comparative advantage. C. a domestic advantage. D. a specialized advantage.
A
The development of skills in one aspect of a job is called A. specialization. B. interdependence. C. entrepreneurship. D. globalization.
A
Which of the following is true of the American economy and trade? A. Most Americans experience benefits from global trade. B. Most Americans are hurt economically by global trade. C. Global trade causes most Americans to lose their job. D. Global trade increases the prices of non-American goods.
A
________ based on comparative advantage benefits both trading partners. A. Specialization B. Interdependence C. Voluntary exchange D. Division of Labor
A
An economy can produce more with the same inputs of land, labor, and capital when people A. are interdependent with their tasks. B. specialize in a specific task or skill. C. use their skills to be self-sufficient. D. focus on local trade and economies.
B
Because trade expands the market for products, it can A. eliminate competition for the production of goods. B. lower the cost of goods by using mass production. C. increase the opportunity cost of producing goods. D. reduce the absolute advantage of production.
B
Economist Michael Bade defined wealth as A. money and the various things money can buy. B. the total value of everything a person owns. C. the monetary value of a person's belongings. D. the marginal benefit of accumulating goods.
B
How do you start calculating a person's comparative advantage? A. You calculate their absolute advantage compared to another's. B. You calculate their opportunity cost associated with an activity. C. You calculate their specialized advantage for producing a good. D. You calculate their interdependent advantage in an economy.
B
Why did the United State's founding fathers set up trade barriers to limit interstate trade? A. They wanted to increase trade among states. B. They wanted to promote self-sufficiency. C. They wanted to get rid of local industries. D. all of the above
B
How does trade increase the variety and quantity of goods available? A. Trade makes nations want to compete with each other. B. Trade helps nations have larger absolute advantages. C. Trade provides access to goods from around the globe. D. Trade reduces the risks accompanying mass production.
C
What is one reason trade makes people wealthier? A. It raises the price of goods. B. It decreases competition. C. It lowers the cost of goods. D. all of the above
C
When people specialize and trade, they A. automatically become very wealthy. B. gain financial economic independence. C. become economically interdependent. D. are better off, but severely inefficient.
C
Which of the following is true of self-sufficient societies? A. Self-sufficient societies are inefficient with the production of goods. B. Self-sufficient societies are often the cause of poverty in certain areas. C. Self-sufficient societies are less productive than specialized societies. D. all of the above
C
According to James Gwartney, Richard Stroup, and Dwight Lee in "Common Sense Economics," what is the foundation of trade? A. bartering B. specialization C. cash flow D. mutual gain
D
How can global trade function as a disadvantage for some people? A. It can create a surplus of available jobs openings. B. It can decrease the competition between markets. C. It can discourage promotion of larger markets. D. It can take business away from local producers.
D
When does a person have a comparative advantage? A. when they have a higher opportunity cost than others B. when they can produce a good using fewer resources C. when they buy a good for less than its production cost D. when they have a lower opportunity cost than others
D
Which of the following could contribute to a nation having a comparative advantage over another nation? A. a warmer climate B. better education C. lots of forests D. all of the above
D
Which of the following would likely discourage specialization in an area? A. an extremely dense population B. a large city with many people C. a flat terrain with vegetation D. a lack of good transportation
D
How do people and nations gain from specialization and trade?
comparative advantage
