Macroeconomics Quiz 2 Comparative Advantage, Trade, Freakonomics
Petroleum
30
MEX Petroleum
40
US
20 Corn 40
1. The figure above shows domestic PPFs of two countries. a.
Find the opportunity cost of producing 1 unit of corn in the United States _________ b.
Find the opportunity cost of 1 unit of corn in Mexico _________ c.
The US has comparative advantage in __________
Corn d.
Mexico has comparative advantage in ____________ e.
If trade opens up between the US and Mexico, US firms should specialize in producing
_______________ and Mexico should specialize in producing _____________
2.
Italy and France produce and consume two goods, cheese and wine. The table below shows labor productivity (= typical worker’s output per day) in both countries. a. France has absolute advantage in __________ Output per unit of labor Input
Italy has comparative advantage in __________
France has comparative advantage in _________
Italy
France
Cheese
20
50
Wine
20
25 b. We expect that Italy will export __________ and import __________ c. Draw PPFs of these two countries below. Label your graphs.

4. In recent years, the United States has:
A.
Exported more merchandise than it has imported.
B.
Imported more merchandise than it has exported.
C.
Realized an approximate balance in its imports and exports.
D.
Experienced a falling absolute amount of imports and a rising absolute amount of exports.
5. A campaign to "buy American" is subject to difficulties because:
A) American labor unions would not support such a campaign.
B) few consumer goods are still made in America.
C) many American products contain many foreign parts.
D) foreign companies would counter the campaign with another advertising strategy.
6. List several principal exports of the United States.
7. Consider outsourcing production of computers to China by US companies. What groups of people benefit from outsourcing. What groups are hurt?
8. Give one example of a protectionist government policy in the US or in another country. What group of producers or consumers benefits from this policy? Who loses from it?

Section 2.
The following questions are based on Freakonomics reading on the course website. Give one sentence explanation for your choice of an answer.
1. What do crack dealers, aspiring actors, and college football players all have in common? a) So long as they work hard, they are all assured of making a great deal of money. b) Even among the lowest paid workers in each group, average wages are relatively high. c) The supply of workers is relatively low, while the demand for them is quite high. d) The potential financial rewards can be quite large, but the probability of success is rather small.
2. As the market for crack cocaine expanded, the number of dealers expanded dramatically as well. Assuming the quality of crack is relatively uniform across suppliers, as the number of suppliers increased relative to demand, we would predict that the profits of individual dealers would: a) increase. b) increase or stay the same. c) stay the same. d) decrease.
3. The observation that “crime rates tend to be high when imprisonment rates are high” led some criminologists to conclude that crime rates would fall if imprisonment rates were lowered. This is an example of: a) confusing correlation with causation. b) positive economic analysis. c) normative theory. d) the argument that incentives matter.
4. Which of the following statements best describes the logic supporting the hypothesis that the legalization of abortion led to a decrease in crime roughly 18 years later? a) The increase in abortion caused a decrease in the population and, consequently, the number criminals. b) The increase in abortion caused a reduction in the percentage of young males (the segment of the population most likely to commit crime), as well as the number males born into dysfunctional families. c) Because abortion had been illegal, legalizing it naturally caused crime to decrease. d) The type of woman who gets an abortion invariably gives birth to children who turn to crime as they get older.
5. Assume one hunter dies from an accidental gunshot for every 100,000 days spent hunting and 1 million days are spent hunting each year. At the same time, 3 boaters die as a result of being struck by lightning for every 100,000 days spent boating and 2 million days are spent boating each year. Which of the following statements is correct? The probability of dying as a result of a) a hunting accident is greater than probability of dying as a result of being struck by lightning while boating. b) being struck by lightning while boating is greater than the probability of dying as a result of a hunting accident. c) a hunting accident and the probability of dying as a result of being struck by lightning while boating are the same.
6. Which of the following statements is correct ? a) The name a parent gives a child has a significant effect on the child’s success in later life. b) The more unique a child’s name is, the more likely he/she is to be successful in later life. c) A child’s name tends to reflect the parent’s life, and the latter is the more important determinant of a child’s success in later life. d) There is no identifiable relationship between a child’s name and his/her prospects for success in later life.
7. Assuming Jake Williams and DeShawn Williams are born in the same neighborhood and into the same familial and economic circumstances, it is likely that: a) Jake and DeShawn will live extremely different lives based solely on their different names. b) Jake and DeShawn will have similar life outcomes. c) because of their different “race-related” names Jake and DeShawn will end up living in different neighborhoods when they grow up. d) we have no idea what will happen.
8. Anyone who bothers to change his/her name in the pursuit of economic success is likely to succeed because: a) he/she is motivated to succeed, not because of the name change. b) the new name can give him/her more opportunities. c) he/she will feel better about himself/herself. d) a person’s name is the primary determinant of his/her success or failure.