Question 1

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.
A)Susan has an absolute advantage over Paul in washing windows.
B)Susan has a comparative advantage over Paul in washing windows.
C)Paul has a comparative advantage over Susan in ironing shirts.
D)All of the above are correct.

Accepted Answer

The answer of Suppose Susan can wash three windows per...

Question 2

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that
A)if he devotes all of his available resources to watermelon production, then he can produce 80 watermelons.
B)he cannot have a comparative advantage over other farmers in producing cantaloupes.
C)his opportunity cost of one watermelon is 2/3 of a cantaloupe.
D)his production possibilities frontier is bowed-out.

Accepted Answer

The opportunity cost of one watermelon is the amount of cantaloupes the farmer must give up to produce one watermelon. For every cantaloupe produced, the farmer must sacrifice 1.5 watermelons. Thus, the opportunity cost of one watermelon is 2/3 of a cantaloupe.

Question 3

If Shawn can produce donuts at a lower opportunity cost than Sue, then
A)Shawn has a comparative advantage in the production of donuts.
B)Sue has a comparative advantage in the production of donuts.
C)Shawn should not produce donuts.
D)Shawn is capable of producing more donuts than Sue in a given amount of time.

Accepted Answer

The principle of comparative advantage states that individuals or countries should specialize in producing the good or service in which they have the lowest opportunity cost. If Shawn can produce donuts at a lower opportunity cost than Sue, it means that Shawn has to give up fewer other goods or services to produce donuts compared to Sue. Therefore, he has a comparative advantage in the production of donuts.

Question 4

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 table is
A)1/5 chair for Mike and 1/3 chair for Sandy.
B)1/5 chair for Mike and 3 chairs for Sandy.
C)5 chairs for Mike and 1/3 chair for Sandy.
D)5 chairs for Mike and 3 chairs for Sandy.

Accepted Answer

The answer of Mike and Sandy are two woodworkers who...

Question 5

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if
A)Canada requires fewer resources than the U.S. to produce a bushel of wheat.
B)the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the U.S.
C)the opportunity cost of producing a bushel of wheat is lower for the U.S. than it is for Canada.
D)the U.S. has an absolute advantage over Canada in producing computer software.

Accepted Answer

Comparative advantage is all about opportunity cost. Canada has a comparative advantage in producing wheat if its opportunity cost of producing wheat is lower than the opportunity cost for the U.S. If Canada can produce wheat at a lower opportunity cost, then it gives up less in terms of producing other goods (like computer software) to produce wheat. Therefore, Canada should specialize in producing wheat and trade with the U.S. for computer software. Option A is incorrect because if Canada is using fewer resources than the U.S. to produce wheat, then Canada has an absolute advantage, not necessarily a comparative advantage. Option C is incorrect because if the opportunity cost of producing a bushel of wheat is lower in the U.S. than in Canada, then the U.S. has the comparative advantage in producing wheat. Option D is irrelevant to the question of comparative advantage in wheat production.

Question 6

When describing the opportunity cost of two producers, economists use the term
A)natural advantage.
B)trading advantage.
C)comparative advantage.
D)absolute advantage.

Accepted Answer

The term used to describe the opportunity cost of two producers is comparative advantage, which refers to a producer's ability to produce a good or service at a lower opportunity cost than another producer. This means that the producer has to give up less in terms of producing one good in order to produce another good. It is important to note that comparative advantage differs from absolute advantage, which simply refers to a producer's ability to produce more of a good or service with the same amount of resources. Therefore, the correct choice is C, comparative advantage.

Question 7

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then
A)Tom must have an absolute advantage in the production of baseball bats.
B)Jim must have an absolute advantage in the production of baseball bats.
C)Tom has a comparative advantage in the production of baseball bats.
D)Jim has a comparative advantage in the production of baseball bats.

Accepted Answer

Since Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, Jim can produce baseball bats at a lower cost (in terms of giving up other goods or activities) than Tom. This means that Jim has a comparative advantage in producing baseball bats, making D the correct answer. It does not necessarily mean Jim has an absolute advantage, as Tom may be able to produce more baseball bats in a given period of time even with a higher opportunity cost.

Question 8

Absolute advantage is found by comparing different producers'
A)opportunity costs.
B)payments to land, labor, and capital.
C)input requirements per unit of output.
D)locational and logistical circumstances.

Accepted Answer

Absolute advantage is determined by comparing the input requirements of different producers for producing one unit of output. Therefore, the correct choice is C - input requirements per unit of output.

Question 9

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is
A)0.36 bushel of corn.
B)2.8 bushels of corn.
C)14 bushels of corn.
D)70 bushels of corn.

Accepted Answer

The opportunity cost of 1 bushel of green beans is the amount of corn the gardener must give up to produce 1 bushel of green beans. If the gardener must give up 14 bushels of corn to get 5 bushels of green beans, then the opportunity cost of 1 bushel of green beans is 14/5 bushels of corn, or 2.8 bushels of corn. Therefore, the answer is B.

Question 10

If Shawn can produce more donuts in one day than Sue can produce in one day, then
A)Shawn has a comparative advantage in the production of donuts.
B)Sue has a comparative advantage in the production of donuts.
C)Shawn has an absolute advantage in the production of donuts.
D)Sue has an absolute advantage in the production of donuts.

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 11

Travis can mow a lawn in two hours or he can trim a tree in one hour. Ricardo can mow a lawn in three hours or he can trim a tree in two hours.
A)Travis has an absolute advantage over Ricardo in trimming trees.
B)Travis has a comparative advantage over Ricardo in mowing lawns.
C)Ricardo has a comparative advantage over Travis in trimming trees.
D)All of the above are correct.

Accepted Answer

The answer of Travis can mow a lawn in two...

Question 12

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is
A)3/5 bushel of corn.
B)5/3 bushels of corn.
C)3 bushels of corn.
D)5 bushels of corn.

Accepted Answer

The opportunity cost of one bushel of corn is 3/5 bushel of green beans, which means that in order to produce one bushel of corn, the gardener would have to give up 3/5 bushel of green beans. Therefore, the opportunity cost of one bushel of green beans is the reciprocal of 3/5, which is 5/3 bushels of corn.

Question 13

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible?
A)Kelly has a comparative advantage in repairing cars and David has a comparative advantage in cooking meals.
B)Kelly has an absolute advantage in repairing cars and David has an absolute advantage in cooking meals.
C)Kelly has a comparative advantage in repairing cars and in cooking meals.
D)David has an absolute advantage in repairing cars and in cooking meals.

Accepted Answer

According to the principle of comparative advantage, individuals should specialize in the activity where they have a lower opportunity cost, and trade with others who have a different comparative advantage. Since it is not possible for Kelly to have a comparative advantage in both repairing cars and cooking meals, option C is not possible. Option A implies that Kelly and David have different comparative advantages, which is possible. Option B implies that Kelly and David are both capable of both activities, but have an absolute advantage in one activity, which is also possible. Option D implies that David is better at both activities than Kelly, which is also possible.

Question 14

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)has a low opportunity cost of producing that good, relative to the opportunity costs of other producers.
B)has a comparative advantage in the production of that good.
C)has an absolute advantage in the production of that good.
D)should be the only producer 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 15

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair is
A)1/5 table for Mike and 1/3 table for Sandy.
B)1/5 table for Mike and 3 tables for Sandy.
C)5 tables for Mike and 1/3 table for Sandy.
D)5 tables for Mike and 3 tables for Sandy.

Accepted Answer

To find the opportunity cost of 1 chair, we need to determine how many tables each woodworker would have to give up to make 1 chair. For Mike, he can make 20 chairs in a month or 5 chairs in a week, so he would give up 1 table for every 5 chairs he makes (4 tables ÷ 20 chairs = 1/5 table per chair). For Sandy, she can make 18 chairs in a month or 3 chairs in a week, so she would give up 1 table for every 3 chairs she makes (6 tables ÷ 18 chairs = 1/3 table per chair). Therefore, the opportunity cost of 1 chair is 1/5 table for Mike and 1/3 table for Sandy, making Choice A the correct answer.

Question 16

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible?
A)Jim has an absolute advantage in the production of baseball bats and in the production of hockey sticks.
B)Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the production of hockey sticks.
C)Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in the production of baseball bats.
D)Jim has a comparative advantage in the production of baseball bats and in the production of hockey sticks.

Accepted Answer

According to the principle of comparative advantage, it is not possible for a single person to have an absolute advantage in the production of both goods. Therefore, options A, B, and C are not possible. Option D is possible, as Jim can have a lower opportunity cost in producing one of the goods (i.e., baseball bats) relative to Tom, and also have a lower opportunity cost in producing the other good (i.e., hockey sticks) relative to Tom. This gives Jim a comparative advantage in both goods.

Question 17

Comparative advantage is related most closely to which of the following?
A)output per hour
B)opportunity cost
C)efficiency
D)bargaining strength in international trade

Accepted Answer

Comparative advantage is based on the concept of opportunity cost, which is the cost of giving up one product or service in order to produce or provide another. Countries that can produce a good or service at lower opportunity cost than another country have a comparative advantage in producing that good or service. Output per hour, efficiency, and bargaining strength in international trade may all be factors that contribute to comparative advantage, but they are not the primary determinant.

Question 18

If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then
A)Iowa has a comparative advantage in the production of corn.
B)Iowa has an absolute advantage in the production of corn.
C)Iowa should import corn from Oklahoma.
D)Oklahoma should produce just enough corn to satisfy its own residents' demands.

Accepted Answer

If Iowa's opportunity cost of corn is lower than Oklahoma's, it means that Iowa can produce corn more efficiently than Oklahoma. This gives Iowa a comparative advantage in the production of corn, meaning that Iowa should focus on producing corn and possibly export it to other areas while Oklahoma produces other goods where they have a comparative advantage.

Question 19

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, while Sandy can make 6 tables or 18 chairs. Given this, we know that
A)Mike has an absolute advantage in chairs.
B)Mike has a comparative advantage in tables.
C)Sandy has an absolute advantage in chairs.
D)Sandy has a comparative advantage in chairs.

Accepted Answer

The answer of Mike and Sandy are two woodworkers who...

Question 20

Both Bill and Mary produce t-shirts and hats. If Bill's opportunity cost of 1 t-shirt is 4 hats and Mary's opportunity cost of 1 t-shirt is 3 hats, then
A)Bill has a comparative advantage in the production of t-shirts.
B)Mary has a comparative advantage in the production of t-shirts.
C)Mary has a comparative advantage in the production of hats.
D)Bill has a comparative advantage in the production of both t-shirts and hats.

Accepted Answer

Mary has a lower opportunity cost of producing 1 t-shirt (3 hats) compared to Bill (4 hats). This means that Mary has a comparative advantage in producing t-shirts, as she gives up less hats to produce 1 t-shirt. Bill, on the other hand, has a comparative advantage in producing hats as his opportunity cost of producing 1 hat is lower than Mary's.

Quiz 3: Interdependence and the Gains From Trade

Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two windows per hour or he can iron five shirts per hour.

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that

If Shawn can produce donuts at a lower opportunity cost than Sue, then

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 table is

Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if

When describing the opportunity cost of two producers, economists use the term

Suppose Jim and Tom can both produce baseball bats. If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, then

Absolute advantage is found by comparing different producers'

Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is

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

Travis can mow a lawn in two hours or he can trim a tree in one hour. Ricardo can mow a lawn in three hours or he can trim a tree in two hours.

Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is

Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is not possible?

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,

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost of 1 chair is

Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following is not possible?

Comparative advantage is related most closely to which of the following?

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

Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, while Sandy can make 6 tables or 18 chairs. Given this, we know that

Both Bill and Mary produce t-shirts and hats. If Bill's opportunity cost of 1 t-shirt is 4 hats and Mary's opportunity cost of 1 t-shirt is 3 hats, then