Question 1

What is the opportunity cost of an item

Accepted Answer

A)  the number of hours needed to earn money to buy it
B)  what you give up to get that item
C)  always less than the dollar value of the item
D)  always equal to the dollar value of the itemE) A) and B)
F) A) and C)

Question 2

Adam Smith developed the theory of comparative advantage as we know it today.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following do economists generally support

Accepted Answer

A)  trade restrictions
B)  government management of trade
C)  export subsidies
D)  free international tradeE) B) and C)
F) A) and B)

Question 4

How is absolute advantage found

Accepted Answer

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

Question 5

Using all available resources,if a farmer can produce either 65 cantaloupes or 70 watermelons,what is the opportunity cost of 1 cantaloupe to the farmer

Accepted Answer

A)  0.82 watermelons
B)  1.08 watermelons
C)  1.50 watermelons
D)  2.00 watermelonsE) B) and C)
F) A) and D)

Question 6

For a country producing two goods,the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

Accepted Answer

A) True 
 B)False

Question 7

Table 3-3
 
-Refer to Table 3-3.What is the opportunity cost of one sweater for Kevin

Accepted Answer

A)  2 blankets
B)  3 blankets
C)  4 blankets
D)  5 blanketsE) B) and C)
F) A) and B)

Question 8

What is the term that means whatever must be given up to obtain an item

Accepted Answer

A)  efficiency
B)  externality
C)  opportunity cost
D)  equilibriumE) A) and B)
F) A) and C)

Question 9

Mike and Sandy are two woodworkers who both make tables and chairs.In one month,Mike can make 6 tables or 18 chairs,where Sandy can make 5 tables or 25 chairs.What is the opportunity cost of 1 chair

Accepted Answer

A)  1/5 table for Mike and 1/3 table for Sandy
B)  5 tables for Mike and 3 tables for Sandy
C)  1/3 table for Mike and 1/5 table for Sandy
D)  3 tables for Mike and 5 tables for SandyE) B) and D)
F) None of the above

Question 10

Which book did David Ricardo write

Accepted Answer

A)  Inquiry into the Nature and Causes of the Wealth of Nations
B)  Principles of Political Economy and Taxation
C)  The General Theory of Prices and Employment
D)  Why Nations TradeE) A) and B)
F) A) and C)

Question 11

Table 3-2
 
-Refer to Table 3-2.What is the opportunity cost of 1 kilogram of meat for the farmer

Accepted Answer

A)  1/4 hour of labour
B)  1 hour of labour
C)  4 kilograms of potatoes
D)  1/4 kilogram of potatoesE) A) and B)
F) A) and D)

Question 12

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour.
 
-Refer to Figure 3-5.If Fred and Ginger devote half of their time (20 hours)  to the production of each good,what would the total production be

Accepted Answer

A)  7 ballet slippers and 8 tap shoes
B)  8 ballet slippers and 8 tap shoes
C)  9 ballet slippers and 6 tap shoes
D)  10 ballet slippers and 8 tap shoesE) None of the above
F) A) and B)

Question 13

Table 3-1
 
-Refer to Table 3-1.What does each producer have a comparative advantage in

Accepted Answer

A)  The rancher has a comparative advantage in neither good, and the farmer has a comparative advantage in both goods.
B)  The rancher has a comparative advantage in both goods, and the farmer has a comparative advantage in neither good.
C)  The rancher has a comparative advantage in meat, and the farmer has a comparative advantage in potatoes.
D)  The rancher has a comparative advantage in potatoes, and the farmer has a comparative advantage in meat.E) All of the above
F) B) and D)

Question 14

Table 3-5
 
-Refer to Table 3-5.If Canada and Japan trade based on the principle of comparative advantage,what could Japan gain from importing an airplane

Accepted Answer

A)  a maximum of 1/3 car
B)  a maximum of 3 cars
C)  a maximum of 4 cars
D)  a maximum of 6 carsE) B) and C)
F) C) and D)

Question 15

Who developed the principle of comparative advantage

Accepted Answer

A)  Brian Mulroney
B)  David Ricardo
C)  John Maynard Keynes
D)  Adam SmithE) A) and B)
F) None of the above

Question 16

Table 3-4
 
-Refer to the table.Who has an absolute advantage in the production of each good

Accepted Answer

A)  Alberta has an absolute advantage in birdhouses, and Manitoba has an absolute advantage in baskets.
B)  Alberta has an absolute advantage in baskets, and Manitoba has an absolute advantage in birdhouses.
C)  Alberta has an absolute advantage in neither good, and Manitoba has an absolute advantage in both goods.
D)  Alberta has an absolute advantage in both goods, and Manitoba has an absolute advantage in neither good.E) B) and C)
F) A) and D)

Question 17

Table 3-6
 
-Refer to Table 3-6.Which country has a comparative advantage in each product

Accepted Answer

A)  Denmark has a comparative advantage in bread, and Italy has a comparative advantage in cheese.
B)  Denmark has a comparative advantage in cheese, and Italy has a comparative advantage in bread.
C)  Denmark has a comparative advantage in both goods, and Italy has a comparative advantage in neither good.
D)  Denmark has a comparative advantage in neither good, and Italy has a comparative advantage in both goods.E) B) and D)
F) B) and C)

Question 18

-Refer to Table 3-5.If Canada and Japan trade based on the principle of comparative advantage,at what price would the two countries trade

Accepted Answer

A)  at a price somewhere between the opportunity costs of the two countries
B)  at a price exactly in the middle of the opportunity costs of the two countries
C)  a price equal to Canada's opportunity cost
D)  at a price equal to Japan's opportunity costE) A) and D)
F) A) and C)

Question 19

Figure 3-3
Ice cream and cones are measured in kilograms.
 
-Refer to Figure 3-3.Suppose that Ben and Jerry have both decided to produce at point A on their production possibilities frontiers.What can we infer from this information

Accepted Answer

A)  that this is not an efficient combination for neither Ben nor Jerry
B)  that Ben and Jerry are both allocating 1/2 their time to the production of each good
C)  that no other production point is as efficient for both Ben and Jerry to produce as point A
D)  that the two must be trading with each otherE) A) and B)
F) A) and D)

Question 20

Table 3-3
 
-Refer to Table 3-3.What is the opportunity cost of one blanket for Amy

Accepted Answer

A)  1/4 sweater
B)  1 sweater
C)  4 sweaters
D)  5 sweatersE) B) and C)
F) A) and D)

Exam 3: Interdependence and the Gains From Trade

Adam Smith developed the theory of comparative advantage as we know it today.

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Which book did David Ricardo write

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Table 3-3 -Refer to Table 3-3.What is the opportunity cost of one sweater for Kevin

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What is the opportunity cost of an item

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Which of the following do economists generally support

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Using all available resources,if a farmer can produce either 65 cantaloupes or 70 watermelons,what is the opportunity cost of 1 cantaloupe to the farmer

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What is the term that means whatever must be given up to obtain an item

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Table 3-2 -Refer to Table 3-2.What is the opportunity cost of 1 kilogram of meat for the farmer

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How is absolute advantage found

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Table 3-4 -Refer to the table.Who has an absolute advantage in the production of each good

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Table 3-1 -Refer to Table 3-1.What does each producer have a comparative advantage in

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Figure 3-3 Ice cream and cones are measured in kilograms. -Refer to Figure 3-3.Suppose that Ben and Jerry have both decided to produce at point A on their production possibilities frontiers.What can we infer from this information

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Table 3-5 -Refer to Table 3-5.If Canada and Japan trade based on the principle of comparative advantage,what could Japan gain from importing an airplane

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-Refer to Table 3-5.If Canada and Japan trade based on the principle of comparative advantage,at what price would the two countries trade

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Mike and Sandy are two woodworkers who both make tables and chairs.In one month,Mike can make 6 tables or 18 chairs,where Sandy can make 5 tables or 25 chairs.What is the opportunity cost of 1 chair

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For a country producing two goods,the opportunity cost of one good will be the inverse of the opportunity cost of the other good.

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Figure 3-5 These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. -Refer to Figure 3-5.If Fred and Ginger devote half of their time (20 hours) to the production of each good,what would the total production be

Correct AnswerverifiedShow Answer

Who developed the principle of comparative advantage

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Table 3-3 -Refer to Table 3-3.What is the opportunity cost of one blanket for Amy

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Table 3-6 -Refer to Table 3-6.Which country has a comparative advantage in each product

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