ECON Exam 2

Ch 8 ^

Ch 8 ^

An import is a good or service:

purchased from a foreign seller.

Why would a company set up internal markets?

To solve the knowledge problem.

When people focus on their comparative advantage and then trade for other things, they:

improve their standard of living or increase their leisure time.

Which of the following is LEAST likely to be traded internationally?

sports arenas

A tariff is a:

tax on imported products.

Which of the following is NOT a trade cost?

the cost of producing a good

Which of the following is an example of a trade cost associated with a U.S. citizen importing a sweater produced in India?

the cost of the tariff on imported sweaters from India

Which of the following benefits could a company gain from using internal markets?

Better allocation of its resources and more accurate predictions.

In 2018, the unemployment rate in the United States went as low as 3.7%, as measured by the Bureau of Labor Statistics. This historically low level of unemployment occurred simultaneously with a large trade deficit. This provides evidence against which of the following arguments against international trade?

International trade may lead to job loss.

Suppose that one hour of labor in Singapore can produce 20 computers or 40 cellphones. Further, suppose that one hour of labor in Ireland can produce 10 computers or 15 cellphones. _____ has a comparative advantage in the production of computers. _____ has a comparative advantage in the production of cellphones.

Ireland; Singapore

Use the data in the table to answer the question. The table provides data on how long it takes Maia and Juanita to mow the lawn and weed the flower beds. hrs to mow lawn | hrs to weed flower beds Maia 3 1 Juanita 4 2 Who has a comparative advantage in mowing lawns?

Juanita because she has a lower opportunity cost

(Figure: Imports and Exports) During the 2008 to 2009 financial crisis, imports as a share of GDP fell in the United States. Which of the following could explain this phenomenon?

The percentage decrease in imports was greater than the percentage decrease in GDP.

As prices _____, they provide useful business intelligence.

aggregate information

Managers can harness market forces by setting up internal markets, which:

are organized within a company to buy and sell scarce resources.

You have a comparative advantage if you can complete a task:

at a lower opportunity cost than anyone else.

Argentina and Chile both produce copper and timber. If Chile produces copper much more efficiently than Argentina and timber slightly more efficiently than Argentina, _____ can benefit from trading copper and timber with each other.

both countries

Russia and Kazakhstan both produce horses and oil. If Kazakhstan is much more efficient than Russia in the production of horses and slightly more efficient than Russia in the production of oil, _____ can benefit from trading horses and oil with each other.

both countries

To get maximum output, you should allocate each task to the person who:

can do the task with the lowest opportunity cost.

You have an absolute advantage in producing a product if you:

can produce the product using the fewest inputs.

Specialization will increase output when it is based on:

comparative advantage.

If Bishan wants to capitalize on comparative advantage in his life, then he should:

do more of what he is relatively good at and then trade for other things.

If you need to make a decision and all the information needed to make a good decision is not available, then you:

have a knowledge problem.

Countries benefit from trade by exporting goods in which their opportunity costs are relatively _____ and importing goods in which their opportunity costs are relatively _____.

low; high

A prediction market is a market where:

payoffs are linked to whether an uncertain event occurs.

The main role of markets is:

reallocating resources to better uses.

Internal markets, which are markets that managers set up within their organization, are:

set up to allocate resources of a company more efficiently, often not using real money.

An export is a good or service:

sold to a foreign buyer.