Question 1

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

Accepted Answer

The principle of comparative advantage explains why trade is beneficial and how it increases overall efficiency and total output, but it does not specify how the gains from trade are distributed among the trading parties. This distribution depends on various factors, including the terms of trade and each party's bargaining power, which are not addressed by the principle of comparative advantage itself.

Question 2

If Shawn can produce more donuts in one day than Sue can produce in one day, then

Accepted Answer

Shawn producing more donuts in one day than Sue means Shawn has an absolute advantage in the production of donuts, as absolute advantage refers to the ability of an individual or group to carry out a particular economic activity more efficiently than another individual or group. Comparative advantage, on the other hand, involves the ability to produce a good at a lower opportunity cost, which is not determined by the information given.

Question 3

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 30 workers in Cornland and 30 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 600 bushels of corn and 150 bushels of oats, while Oatland will produce and consume 20 bushels of corn and 1300 bushels of oats. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then the combined yearly output of the two countries would increase by

Accepted Answer

Cornland has a comparative advantage in producing corn because it can produce corn at a ratio of 40 bushels per worker compared to Oatland's 5 bushels per worker. Oatland has a comparative advantage in producing oats because it can produce oats at a ratio of 50 bushels per worker compared to Cornland's 10 bushels per worker. If both countries specialize according to their comparative advantages, Cornland would produce 40 bushels of corn * 30 workers = 1200 bushels of corn (an increase of 600 bushels from its initial production without trade), and Oatland would produce 50 bushels of oats * 30 workers = 1500 bushels of oats (an increase of 200 bushels from its initial production without trade). The combined increase in yearly output would be 600 bushels of corn (1200-600) and 200 bushels of oats (1500-1300), totaling 580 bushels of corn and 50 bushels of oats when considering the initial production without trade mentioned in the question.

Question 4

Which of the following is not correct?

Accepted Answer

The gains from specialization and trade are actually based on comparative advantage, not absolute advantage. Comparative advantage allows for more efficient allocation of resources by enabling producers to specialize in goods where they have a lower opportunity cost, leading to increased overall production and trade benefits.

Question 5

Suppose Jack and Tucker can both produce two goods: toy cars and dinosaur figures. Which of the following is not possible?

Accepted Answer

It's not possible for one person to have a comparative advantage in the production of both goods. Comparative advantage means producing a good at a lower opportunity cost than others, and if one person has a comparative advantage in one good, the other person must have a comparative advantage in the other good.

Question 6

Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' production possibilities frontier?

Accepted Answer

The answer of Assume for the United States that the...

Question 7

Which of the following statements about comparative advantage is not true?

Accepted Answer

Comparative advantage is determined by who can produce a good at a lower opportunity cost, not necessarily who uses the fewest resources. Absolute advantage refers to using the fewest resources.

Question 8

Nick and Traci are two woodworkers who both make tables and chairs. In one month, Nick can make 3 tables or 6 chairs, whereas Traci can make 16 tables or 48 chairs. Given this, we know that the opportunity cost of 1 chair is

Accepted Answer

The opportunity cost of producing 1 chair for Nick is 1/2 table, since he can make 6 chairs or 3 tables, implying he sacrifices 1/2 table for each chair he makes instead. For Traci, the opportunity cost of 1 chair is 1/3 table, as she can make 48 chairs or 16 tables, meaning she gives up 1/3 of a table for each chair produced.

Question 9

Total output in an economy increases when each person specializes because

Accepted Answer

Specialization allows individuals to focus on the production of goods and services for which they have a comparative advantage, leading to increased efficiency and total output in the economy.

Question 10

Table 3-10
Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate.
​
​
 
-Refer to Table 3-10. What is Teresa's opportunity cost of producing one bushel of wheat?

Accepted Answer

Teresa's opportunity cost of producing one bushel of wheat is determined by how much beef she has to give up to produce that additional bushel. If the table shows that Teresa can produce either a certain amount of wheat or a certain amount of beef, you would calculate the opportunity cost by dividing the amount of beef she can produce by the amount of wheat she can produce. Without the specific numbers from Table 3-10, the general approach is to find the ratio of beef to wheat for Teresa, which represents the amount of beef given up for each bushel of wheat produced. The correct answer, based on the options provided, suggests that for every bushel of wheat Teresa produces, she gives up 5/3 pounds of beef, indicating the opportunity cost of producing wheat in terms of beef.

Question 11

The gains from trade are

Accepted Answer

Trade allows countries to specialize in the production of goods and services in which they have a comparative advantage, leading to more efficient allocation of resources and increased overall economic welfare.

Question 12

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Accepted Answer

A lower opportunity cost means Iowa can produce corn more efficiently relative to other goods than Oklahoma can, indicating a comparative advantage. Absolute advantage, trade decisions, and production strategies for self-sufficiency are not directly determined by comparative opportunity costs.

Question 13

Absolute advantage is found by comparing different producers'

Accepted Answer

Absolute advantage is determined by comparing the input requirements per unit of output between different producers, indicating which producer can produce a good using fewer resources.

Question 14

If China is capable of producing either teddy bears or toy trains or some combination of the two, then

Accepted Answer

The opportunity cost of producing one good is the amount of another good that must be given up to produce it. In this context, if China uses its resources to produce teddy bears, those resources cannot be used to produce toy trains, and vice versa. Therefore, the opportunity cost of producing teddy bears in terms of toy trains is the inverse of the opportunity cost of producing toy trains in terms of teddy bears. This is a fundamental principle of economics related to trade-offs and opportunity costs.

Question 15

What must be given up to obtain an item is called

Accepted Answer

Opportunity cost refers to the value of the next best alternative that must be forgone as a result of making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Question 16

Trade can make everybody better off because it

Accepted Answer

Trade allows individuals and countries to specialize in the production of goods and services for which they have a comparative advantage, leading to more efficient production and increased overall economic welfare.

Question 17

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

Accepted Answer

An absolute advantage exists when a producer requires fewer inputs to produce a given amount of a good compared to other producers. This concept focuses on the efficiency in the use of inputs, not on the opportunity cost or the exclusivity of production.

Question 18

A gardener has the ability to grow either apples or pears or some combination of the two. Given no other information, it follows that the gardener's opportunity cost of a pound of apples multiplied by his opportunity cost of a pound of pears

Accepted Answer

The opportunity cost of one good in terms of another is the amount of the other good that must be given up to produce one more unit of the first good. If the gardener grows apples, he sacrifices the opportunity to grow pears, and vice versa. The opportunity cost of a pound of apples is the amount of pears forgone, and the opportunity cost of a pound of pears is the amount of apples forgone. When these opportunity costs are multiplied, the result is 1, reflecting the reciprocal nature of opportunity cost in a two-good model.

Question 19

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 1 radios or 4 televisions per year. Each nation has 150 workers. Also, suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 50 radios to Teeveeland in exchange for 50 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

Accepted Answer

Radioland has a comparative advantage in producing radios (4 radios per worker vs. 1 television per worker), so it specializes in radios. With 150 workers, it can produce 600 radios (150 workers * 4 radios/worker). After trading 50 radios for 50 televisions, Radioland has 550 radios and 50 televisions. Teeveeland has a comparative advantage in producing televisions (4 televisions per worker vs. 1 radio per worker), so it specializes in televisions. With 150 workers, it can produce 600 televisions (150 workers * 4 televisions/worker). After trading 50 televisions for 50 radios, Teeveeland has 550 televisions and 50 radios.

Question 20

Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by

Accepted Answer

Before the war, Caninia would specialize in producing meals (80 meals per day with 10 workers) because it has a comparative advantage in meal production, and Felinia would specialize in producing blankets (50 blankets per day with 10 workers) because it has a comparative advantage in blanket production. After the war, Caninia produces 10 blankets and 40 meals, and Felinia produces 25 blankets and 5 meals. The combined output before the war was 50 blankets and 80 meals, and after the war, it is 35 blankets and 45 meals. The decline is therefore 15 blankets (50-35) and 35 meals (80-45).

Quiz 3: Interdependence and the Gains From Trade

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

If Shawn can produce more donuts in one day than Sue can produce in one day, then

Which of the following is not correct?

Suppose Jack and Tucker can both produce two goods: toy cars and dinosaur figures. Which of the following is not possible?

Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' production possibilities frontier?

Which of the following statements about comparative advantage is not true?

Nick and Traci are two woodworkers who both make tables and chairs. In one month, Nick can make 3 tables or 6 chairs, whereas Traci can make 16 tables or 48 chairs. Given this, we know that the opportunity cost of 1 chair is

Total output in an economy increases when each person specializes because

Table 3-10 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-10. What is Teresa's opportunity cost of producing one bushel of wheat?

The gains from trade are

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Absolute advantage is found by comparing different producers'

If China is capable of producing either teddy bears or toy trains or some combination of the two, then

What must be given up to obtain an item is called

Trade can make everybody better off because it

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

A gardener has the ability to grow either apples or pears or some combination of the two. Given no other information, it follows that the gardener's opportunity cost of a pound of apples multiplied by his opportunity cost of a pound of pears

Quiz 3: Interdependence and the Gains From Trade

The principle of comparative advantage does not provide answers to certain questions. One of those questions is

If Shawn can produce more donuts in one day than Sue can produce in one day, then

Which of the following is not correct?

Suppose Jack and Tucker can both produce two goods: toy cars and dinosaur figures. Which of the following is not possible?

Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' production possibilities frontier?

Which of the following statements about comparative advantage is not true?

Nick and Traci are two woodworkers who both make tables and chairs. In one month, Nick can make 3 tables or 6 chairs, whereas Traci can make 16 tables or 48 chairs. Given this, we know that the opportunity cost of 1 chair is

Total output in an economy increases when each person specializes because

Table 3-10 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. ​ ​ -Refer to Table 3-10. What is Teresa's opportunity cost of producing one bushel of wheat?

The gains from trade are

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Absolute advantage is found by comparing different producers'

If China is capable of producing either teddy bears or toy trains or some combination of the two, then

What must be given up to obtain an item is called

Trade can make everybody better off because it

The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,

A gardener has the ability to grow either apples or pears or some combination of the two. Given no other information, it follows that the gardener's opportunity cost of a pound of apples multiplied by his opportunity cost of a pound of pears

Table 3-10 Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. -Refer to Table 3-10. What is Teresa's opportunity cost of producing one bushel of wheat?