Question 1 of 15
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Multiple Choice: Please select the best answer and click "submit."
Correct! These are all reasons
countries benefit from
international trade.
Specialization allows nations to
use their resources more
efficiently. By producing those
goods for which they have a
comparative advantage, they
also increase their efficiency.
Comparative advantage is just
another way of saying they
have an ability to produce
goods at a lower opportunity
cost. And finally, the division of
labor also makes nations more
efficient.
In the case of international trade, which of the following does not benefit
all nations involved?
A.
Specialization
B.
Comparative advantage
C.
All the choices are benefits.
D.
Ability to produce goods at a lower opportunity cost
E.
Division of labor
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Question 2 of 15
Multiple Choice: Please select the best answer and click "submit."
Suppose an average Chinese worker can build an engine in two hours and assemble five computers in the
same amount of time. Also assume an average Japanese worker can build an engine in one hour. For
Japanese workers to have a comparative advantage in building engines, how many computers must they be
able to assemble in two hours?
A.
The number of computers they can assemble is irrelevant in determining the comparative advantage.
B.
More than five
C.
Fewer than ten
D.
There isn't enough information to say.
E.
More than five and fewer than ten
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The correct answer is: fewer than ten. If an average Japanese worker has a comparative advantage in building engines,
he has to give up fewer assembled computers than a Chinese worker does in the amount of time it takes each one to
build an engine.
When a Chinese worker builds an engine, she gives up a chance to assemble five computers. A Japanese worker can
build an engine in one hour, so in two hours he can build two engines. For his opportunity cost to be less than hers, he
has to be able to assemble fewer than five computers an hour. Therefore, in two hours he must be able to assemble
fewer than ten computers.
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Question 3 of 15
True-False: Please select true or false and click "submit."
True or False: Both people and countries are motivated by their opportunity costs to specialize.
A.
True.
B.
False.
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Correct. Opportunity costs motivate people and countries to specialize. And the difference in opportunity costs
motivates them to trade with other people or countries.
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Question 4 of 15
True-False: Please select true or false and click "submit."
True or False: If one country has a lower opportunity cost of producing corn than other countries do, that
country has an absolute advantage in producing corn.
A.
True.
B.
False.
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Correct! If one country has a lower opportunity cost of producing corn than other countries, that country has a
comparative advantage in corn production, not necessarily an absolute advantage. Absolute advantage is the ability to
produce something using fewer resources than other producers.
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Question 5 of 15
Multiple Choice: Please select the best answer and click "submit."
Suppose a Mexican worker can build 12 wheels or paint 1 frame in an hour. A Canadian worker, on the
other hand, can build 8 wheels or paint 2 frames in an hour. Which of the following statements is true?
A.
A Canadian worker's opportunity cost for making 1 wheel is painting 4 frames.
B.
A Mexican worker's opportunity cost for making 1 wheel is painting 1/6 of a frame.
C.
A Mexican worker has a comparative advantage in wheel production.
D.
A Mexican worker has an absolute advantage in both activities.
E.
A Canadian worker's opportunity cost for painting 1 frame is making 1/4 of a wheel.
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Correct! A Mexican worker has a comparative advantage in wheel production. It only costs a Mexican worker 1/12 of a
frame to build a wheel, but it costs a Canadian worker 1/4 of a frame to build a wheel.
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Question 6 of 15
True-False: Please select true or false and click "submit."
True or False: If the country called Superproducia can produce goods and services using fewer resources
than any other country in the world, Superproducia should produce everything for itself and not trade.
A.
True.
B.
False.
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Correct! Even if Superproducia can produce everything using fewer resources than other countries, it's still beneficial
for Superproducia to specialize in something in which it has the comparative advantage and engage in trade with other
nations.
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Question 7 of 15
Multiple Choice: Please select the best answer and click "submit."
Suppose Doward can peel 15 potatoes in an hour, or he can slice 20 onions in an hour. Shashawna can peel
30 potatoes in an hour, or she can slice 25 onions. Which of the following statements is true?
A.
Doward's opportunity cost of peeling one potato is 6/5 of an onion.
B.
Shashawna has an absolute advantage in both activities.
C.
Doward has a comparative advantage in potato peeling.
D.
Shashawna has a comparative advantage in onion slicing.
E.
Shashawna's opportunity cost of peeling one potato is 6/5 of an onion.
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Correct! Shashawna has an absolute advantage in both activities. She can peel more potatoes and slice more onions
than Doward can in the same amount of time. Therefore, she uses fewer resources, in this case time, to do the same job.
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Question 8 of 15
True-False: Please select true or false and click "submit."
True or False: According to early economist David Ricardo, if countries follow the law of absolute
advantage, trade and specialization will be mutually beneficial.
A.
True.
B.
False.
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Correct! According to Ricardo, if countries follow the law of comparative (not absolute) advantage, trade and
specialization will be mutually beneficial.
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Question 9 of 15
Multiple Choice: Please select the best answer and click "submit."
Robinson can pick 50 pieces of fruit or catch 20 fish in a day. Friday can pick 40 pieces of fruit or catch 10
fish in a day. Which of the following statements is not true?
A.
Friday has a comparative advantage in fruit.
B.
The cost of Robinson catching a fish is 2/5 of a piece of fruit.
C.
The cost of Friday picking a piece of fruit is 1/4 of a fish.
D.
Robinson has a comparative advantage in fish.
E.
The cost of Friday catching one fish is four pieces of fruit.
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The correct answer is: the cost of Robinson catching a fish is 2/5 of a piece of fruit. This statement is not true because
the opportunity cost to Robinson of catching one fish is two and a half (5/2) pieces of fruit, not 2/5 of a piece of fruit.
That's how many fish Robinson could catch in the time it takes him to pick one piece of fruit.
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Question 10 of 15
Multiple Choice: Please select the best answer and click "submit."
Comparative advantage demonstrates that:
A.
a country should specialize in producing goods or services for which it has a lower opportunity cost.
B.
an industrialized country should export but not import.
C.
a country that isn't competitive should import everything.
D.
a country specializes in producing goods or services for which it has a higher opportunity cost.
E.
a country should only produce those goods in which it has an absolute advantage.
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The correct answer is: a country should specialize in producing goods or services for which it has a lower opportunity
cost. Comparative advantage says that all countries should specialize in those products for which they have a relative
advantage and trade with those who have a relative disadvantage in producing those products. The relative advantage is
a lower opportunity cost. This means nations should import and export. They would export goods in which they have a
comparative advantage and import goods in which they don't.
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Question 11 of 15
True-False: Please select true or false and click "submit."
True or False: Specialization and international trade based on comparative advantages benefits everyone.
A.
True
B.
False
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The correct answer is: Although trade benefits society as a whole, some individuals within the economy could lose
their jobs (and income) through trade and specialization, for example if they don't produce the good the economy is
specializing in.
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Question 12 of 15
Multiple Choice: Please select the best answer and click "submit."
Robinson can pick 50 pieces of fruit or catch 20 fish in a day. Friday can pick 40 pieces of fruit or catch 10
fish in a day. Which of the following is a likely trade?
A.
Robinson gives Friday three pieces of fruit in exchange for one fish.
B.
Friday gives Robinson one piece of fruit for a fish.
C.
Friday gives Robinson four fish in exchange for one piece of fruit.
D.
Robinson gives Friday half a fish in exchange for a piece of fruit.
E.
Friday gives Robinson three pieces of fruit in exchange for one fish.
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The correct answer is: Friday gives Robinson three pieces of fruit in exchange for one fish. The terms of trade must be
between the two opportunity costs for trade to occur. In this case, two and a half pieces of fruit (Robinson's opportunity
cost) are less than three (the terms of trade), which is less than four (Friday's opportunity cost for fish). Friday is willing
to trade three pieces of fruit for one fish because it's less than the four pieces of fruit she'd give up to catch the fish
herself.
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Question 13 of 15
Multiple Choice: Please select the best answer and click "submit."
Suppose a German worker can clean 3 windows or wash 2 shirts in one hour. A Slovakian worker can clean
6 windows or wash 4 shirts in one hour. Which of the following statements is true?
A.
A Slovakian worker's opportunity cost of washing one shirt is 2/3 of a window.
B.
German workers have an absolute advantage in both activities.
C.
German workers have a comparative advantage in cleaning windows.
D.
A German worker's opportunity cost of cleaning one window is 2/3 of a shirt.
E.
Slovakian workers have a comparative advantage in cleaning windows.
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The correct answer is: a German worker's opportunity cost of cleaning one window is 2/3 of a shirt. The worker gives
up two shirts to wash three windows, or 2/3 of a shirt per window.
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Question 14 of 15
Multiple Choice: Please select the best answer and click "submit."
What does it mean to be efficient?
A.
An economy is efficient if it produces the greatest number of a single good as is possible.
B.
An economy is efficient if it produces at a point outside its PPF.
C.
An economy is efficient if it produces at a point inside its PPF.
D.
An economy is efficient if production of one good or service must be decreased in order to produce more
of another.
E.
An economy is efficient if the production of any one good or service can be increased without increasing
the amount of resources used or the production of another good or service.
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The correct answer is: an economy is efficient if production of one good or service must be decreased in order to
produce more of another. When an economy is efficient, it can't produce more of one good without producing less of
another. All points on a PPF represent efficient combinations of resources.
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Question 15 of 15
True-False: Please select true or false and click "submit."
True or False: Voluntary trade mutually benefits those who participate in it because of the differences
between opportunity costs.
A.
True.
B.
False.
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Correct! The difference in opportunity costs is what motivates different producers to trade with each other.
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