Question 1

Table 3-2
 
-According to Table 3-2:

Accepted Answer

A)   Lee has an absolute advantage in neither goods, and John has an absolute advantage in both goods
B)   Lee has an absolute advantage in neither goods, and John has an absolute advantage in butter
C)   Lee has an absolute advantage in rice, and John has an absolute advantage in butter
D)   Lee has an absolute advantage in rice, and John has an absolute advantage in both goodsE) B) and C)
F) A) and D)

Question 2

Graph 3-1
  These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour.
-Refer to Table 3-1. For the cattle farmer, the opportunity cost of 1 kg of meat is:

Accepted Answer

A)   five hours of labour
B)   one hour of labour
C)   1/4 kg of potatoes
D)   4 kg of potatoesE) All of the above
F) C) and D)

Question 3

Table 3-3
 
-Refer to Table 3-3. The opportunity cost of one aeroplane for Europe is:

Accepted Answer

A)   four cars
B)   three cars
C)   1/3 car
D)   1/4 carE) B) and C)
F) None of the above

Question 4

Imports arise because:

Accepted Answer

A)   the importing country can produce the good more cheaply than the exporting country
B)   the exporting country can produce the good at a higher cost than the importing country
C)   the importing country can produce the good at an equal cost to the exporting country
D)   the exporting country can produce the good more cheaply than the importing countryE) A) and B)
F) A) and C)

Question 5

Table 3-3
 
-Refer to Table 3-3. If Europe and the US trade according to the principle of comparative advantage:

Accepted Answer

A)   all individuals in both countries will gain
B)   both countries can have more aeroplanes and cars
C)   Europe will specialise in cars and the US will specialise in aeroplanes
D)   both countries will consume on their own production possibilities frontierE) A) and B)
F) A) and C)

Question 6

Trade can benefit society as a whole because it allows:

Accepted Answer

A)   people to specialise in activities in which they have a comparative advantage
B)   for a more efficient use of resources
C)   for goods to be obtained at a lower opportunity cost
D)   all of the above are correctE) A) and B)
F) A) and C)

Question 7

It takes Barbara four hours to make a pie and four hours to make a shirt. It takes Gary two hours to make a pie and five hours to make a shirt. Barbara should specialise in making shirts and Gary should specialise in making pies. Then they should trade.

Accepted Answer

A) True 
 B)False

Question 8

Jess makes coconut brownies that all her friends rave about but is also a highly paid marketing executive. Should she open a healthy bakery, like her friends suggest?

Accepted Answer

Probably not. Unless Jess can make more ...

Question 9

Table 3-4
 
-Refer to Table 3-4. If England and Spain trade according to the principle of comparative advantage, England will export which product to Spain:

Accepted Answer

A)   bread
B)   cheese
C)   both cheese and bread
D)   England cannot benefit from trade with SpainE) A) and C)
F) C) and D)

Question 10

Graph 3-1
  These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour.
-Refer to Graph 3-1. For Friday, the opportunity cost of 1 kg of fish is:

Accepted Answer

A)   1 kg of coconuts
B)   3/2 kg of coconuts
C)   1/3 kg of coconuts
D)   2 kg of fishE) B) and D)
F) B) and C)

Question 11

International trade may make some individuals in a nation better off, while other individuals are made worse off.

Accepted Answer

A) True 
 B)False

Question 12

Trade allows a country to pivot outwards its production possibilities frontier.

Accepted Answer

A) True 
 B)False

Question 13

One reason for which the English government might impose a tariff on Spanish cheese imports is:

Accepted Answer

A)   national pride
B)   a general rivalry between Spain and England
C)   the possibility of disease in Spanish cheese
D)   pressure from English cheese lobby groupsE) A) and B)
F) None of the above

Question 14

Table 3-4
 
-Refer to Table 3-4. The fact of England imposing a tariff on cheese imports would be:

Accepted Answer

A)   protecting the English cheese industry from international competition
B)   encouraging England to specialise in and export cheese
C)   allowing a greater production of dairy products in England
D)   a policy intended to harm the Spanish cheese industryE) A) and D)
F) A) and B)

Question 15

Table 3-4
 
-According to Table 3-4, if the English government decided to impose a tariff on cheese imports, this would:

Accepted Answer

A)   make bread and cheese cheaper for English consumers
B)   make bread and cheese more expensive for English consumers
C)   make bread more expensive for English consumers
D)   make cheese more expensive for English consumersE) A) and C)
F) B) and C)

Question 16

Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Accepted Answer

Comparative advantage is the principle u...

Question 17

Table 3-2
 
-Refer to Table 3-2. For John the opportunity cost of one kg of rice:

Accepted Answer

A)   3/4 kg of butter
B)   3/2 kg of butter
C)   4/3 kg of butter
D)   2/3 kg of butterE) All of the above
F) A) and B)

Question 18

Suppose it takes Jean four hours to catch 10 fish and one hour to collect one kilogram of mushrooms. It takes Lee four hours to catch 10 fish and 30 minutes to collect 1 kg of mushrooms. Lee should specialise in catching fish and Jean should specialise in collecting mushrooms.

Accepted Answer

A) True 
 B)False

Question 19

Absolute advantage is found by:

Accepted Answer

A)   comparing opportunity costs
B)   calculating the dollar cost of production
C)   comparing the productivity of one nation to that of another
D)   first determining which country has a comparative advantageE) All of the above
F) B) and D)

Question 20

Exports arise because:

Accepted Answer

A)   the importing country has a comparative advantage in consuming a good
B)   the exporting country has a comparative advantage in producing a good
C)   the exporting country has a comparative advantage in consuming a good
D)   the importing country has a comparative advantage in producing a goodE) None of the above
F) A) and C)

Exam 3: Interdependence and the Gains From Trade

Graph 3-1 These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour. -Refer to Graph 3-1. For Friday, the opportunity cost of 1 kg of fish is:

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Table 3-4 -Refer to Table 3-4. If England and Spain trade according to the principle of comparative advantage, England will export which product to Spain:

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Table 3-4 -Refer to Table 3-4. The fact of England imposing a tariff on cheese imports would be:

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Table 3-2 -According to Table 3-2:

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Trade allows a country to pivot outwards its production possibilities frontier.

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Graph 3-1 These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12 hours of labour. -Refer to Table 3-1. For the cattle farmer, the opportunity cost of 1 kg of meat is:

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Trade can benefit society as a whole because it allows:

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Absolute advantage is found by:

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Table 3-2 -Refer to Table 3-2. For John the opportunity cost of one kg of rice:

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Imports arise because:

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Table 3-4 -According to Table 3-4, if the English government decided to impose a tariff on cheese imports, this would:

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One reason for which the English government might impose a tariff on Spanish cheese imports is:

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Table 3-3 -Refer to Table 3-3. If Europe and the US trade according to the principle of comparative advantage:

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Suppose it takes Jean four hours to catch 10 fish and one hour to collect one kilogram of mushrooms. It takes Lee four hours to catch 10 fish and 30 minutes to collect 1 kg of mushrooms. Lee should specialise in catching fish and Jean should specialise in collecting mushrooms.

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Jess makes coconut brownies that all her friends rave about but is also a highly paid marketing executive. Should she open a healthy bakery, like her friends suggest?

Correct AnswerverifiedProbably not. Unless Jess can make more ...View AnswerShow Answer

Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Correct AnswerverifiedComparative advantage is the principle u...View AnswerShow Answer

International trade may make some individuals in a nation better off, while other individuals are made worse off.

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Table 3-3 -Refer to Table 3-3. The opportunity cost of one aeroplane for Europe is:

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It takes Barbara four hours to make a pie and four hours to make a shirt. It takes Gary two hours to make a pie and five hours to make a shirt. Barbara should specialise in making shirts and Gary should specialise in making pies. Then they should trade.

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Exports arise because:

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Probably not. Unless Jess can make more ...
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Comparative advantage is the principle u...
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