Economics Ch. 3

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

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

Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade... a. the opportunity cost of 1 watch is 12 rings b. the opportunity cost of 1 watch is 4 rings c. the opportunity cost of 1 watch is 1/3 of a ring d. the opportunity cost of 1 watch is 1/4 of a ring e. the opportunity cost of 1 watch is 3 rings

e. the opportunity cost of 1 watch is 3 rings

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

d. A self sufficient country at best can consume on its PPF

Suppose a county's worker can produce 4 watches per hour or 12 rings per hour. If there is no trade... a. the domestic price of 1 ring is 3 watches b. the domestic price of 1 ring is 4 watches c. the domestic price of 1 ring is 12 watches d. the domestic price of 1 ring is 1/3 of a watch e. the domestic price of 1 ring is 1/4 of a watch

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

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

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

Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor. What will these nations trade? a. China will export aircraft, and the United States will export shirts b. China will export shirts, and the United States will export aircraft c. Both nations will export shirts d. There are no gains from trade in the situation

b. China will export shirts, and the United States will export aircraft

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? a. If the United States has an absolute advantage in the production of food, then Mexico must have an absolute advantage in the production of clothing. b. 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. c. If the United States has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing. d. If the United States has a comparative advantage in the production of food, Mexico might also have a comparative advantage in the production of food.

b. 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.

Kayla can cook diner in 30 minutes and wash the laundry in 20 minutes. Her roommate takes twice as long to do each task. How should the roommates allocate the work? a. Kayla should do more of the cooking based on her comparative advantage b. There are no gains from trade in the situation c. Kayla should do more of the washing based on her absolute advantage d. Kayla should do more of the washing based on her comparative advantage

b. There are no gains from trade in the situation

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 partners c. countries with a comparative advantage in the production of envy good need not specialize d. countries should specialize in the production of goods that they enjoy consuming

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

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

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

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? a. Joe should not hire an assistant because the assistant cannot type as fast as he can. b. Joe should hire the assistant as long as he pays the assistant less than $100 per hour. c. Joe should hire the assistant as long as he pays the assistant less than $25 per hour.

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