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Exam 2: Specialization and Exchange

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Question 1

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A country's newest ruler has decided the country will become self-sufficient and ceases trade with the rest of the world.The likely outcome of this action will be that the country's citizen's will be:

A) forced to consume less than before if they possessed a comparative advantage in the production of a good.
B) better off than before if they possess an absolute advantage in the production of a good.
C) better off than before only if they have the absolute advantage in the production of most goods they consume.
D) better off than before only if they have the comparative advantage in the goods they consume.

E) A) and B)
F) A) and C)

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Question 2

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Tom and Jerry have two tasks to do all day: set traps and build bombs.If Tom spends all day setting traps,he will have set 16 traps.If he instead devotes his day to building bombs,Tom will build 4 bombs.If Jerry spends his day setting traps,he will set 14 traps;if he spends the day building bombs,he will build 7 bombs.Based on their production possibilities frontiers,Tom and Jerry:

A) can both benefit from trade because absolute advantage exists.
B) can both benefit from trade because comparative advantage exists.
C) cannot benefit from trade because Tom has the absolute advantage in both goods.
D) will not decide to trade because no comparative advantage exists.

E) None of the above
F) A) and B)

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Question 3

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Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.Which of the following statements is true?

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.Two possible consumption bundles that Country B could produce are:

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day.A Bangladeshi worker,on the other hand,can produce 100 pairs of gloves or grow 200 radishes per day.The opportunity cost of one pair of gloves is:

When a producer has an absolute advantage at producing a good,it means the producer:

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.Which of the following statements is true?

Tom and Jerry have two tasks to do all day: set traps and build bombs.If Tom spends all day setting traps,he will have set 16 traps.If he instead devotes his day to building bombs,Tom will build 4 bombs.If Jerry spends his day setting traps,he will set 14 traps;if he spends the day building bombs,he will build 7 bombs.If Tom decides to specialize in setting traps,he would agree to which terms of trade with Jerry?

Trade:

Hurricane Katrina destroyed much of New Orleans and other parts of the South.Which of the following statements is true?

Tom and Jerry have two tasks to do all day: set traps and build bombs.If Tom spends all day setting traps,he will have set 16 traps.If he instead devotes his day to building bombs,Tom will build 4 bombs.If Jerry spends his day setting traps,he will set 14 traps;if he spends the day building bombs,he will build 7 bombs.Because Tom has a ____________ opportunity cost for one bomb compared to Jerry,we know Tom has _________________________.

The concepts of comparative advantage,specialization,and trade form a compelling argument in favor of:

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.A bundle of goods that Country B could not make would be:

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.Suppose Country B's population of workers increased to 600.Which of the following statements is now true?

Suppose that only two goods are produced in an economy.If a country possesses the comparative advantage in the production of one good:

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.The United States should:

When a producer is acting efficiently:

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day.A Bangladeshi worker,on the other hand,can produce 100 pairs of gloves or grow 200 radishes per day.Using the concepts of advantage and trade,we can say that:

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.Suppose Country A specializes in bananas,and Country B specializes in tomatoes.The limits to the terms of trade that Country A would find acceptable are:

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.A Canadian worker,on the other hand,can produce 10 pairs of shoes or grow 20 apples per day.The opportunity cost of a pair of shoes is __________ for the United States than Canada,so Canada has the ______________ advantage in shoe production.