Question 1

If Korea is capable of producing either shoes or soccer balls or some combination of the two,then
A) Korea should specialize in the product in which it has an absolute advantage.
B) it would be impossible for Korea to have an absolute advantage over another country in both products.
C) it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods.
D) Korea's opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.

Accepted Answer

If Korea has the option to produce either shoes or soccer balls, then it has a comparative advantage in one product over the other. The opportunity cost of shoes is the inverse of the opportunity cost of soccer balls. Therefore, Korea should focus on producing the product with a lower opportunity cost and trade with another country for the other product. This will enable both countries to benefit from trade.

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 number of cantaloupes that the farmer could have produced if he had sacrificed the resources for one watermelon. Since he sacrifices 1.5 watermelons for each cantaloupe, his opportunity cost of one watermelon is 2/3 of a cantaloupe. Choices A, B, and D are incorrect because the information given does not allow us to determine the number of watermelons the farmer can produce if he devotes all his resources to watermelon production or if he has a comparative advantage over other farmers in producing cantaloupes or if his production possibilities frontier is bowed-out.

Question 3

What must be given up to obtain an item is called
A) out-of-pocket cost.
B) comparative worth.
C) opportunity cost.
D) absolute value.

Accepted Answer

Opportunity cost refers to what must be given up to obtain a particular item or opportunity. It is the cost of the next best alternative that must be forgone in order to pursue a certain action or decision. Therefore, the best answer is C.

Question 4

The opportunity cost of an item is
A) the number of hours that one must work in order to buy one unit of the item.
B) what you give up to get that item.
C) always less than the dollar value of the item.
D) always greater than the cost of producing the item.

Accepted Answer

Opportunity cost is the value of the next best alternative that must be given up in order to pursue a certain action. Therefore, the correct answer is B. The other options are incorrect because they do not accurately define the concept of opportunity cost.

Question 5

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

The opportunity cost of making one chair is the number of tables that could have been made instead. For Mike, the opportunity cost is 1/4 table per chair (since he can make 4 tables or 20 chairs in a month). For Sandy, the opportunity cost is 1/6 table per chair (since she can make 6 tables or 18 chairs in a month). Therefore, the answer is A, which shows that the opportunity cost of 1 chair is 1/5 table for Mike and 1/3 table for Sandy.

Question 6

Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds)that the nation of Bonovia could produce in a given month. 
-Refer to Figure 3-11.If the production possibilities frontier shown is for 240 hours of production,then how long does it take Bonovia to make one pound of cheese?
A) 3/5 hour
B) 3/4 hour
C) 4/3 hours
D) 5/3 hours

Accepted Answer

To find how long it takes to make one pound of cheese, we can look at the slope of the production possibilities frontier. The slope is given by the change in ham production divided by the change in cheese production. Moving from point A to point B on the graph, ham production decreases by 3 pounds while cheese production increases by 4 pounds. Therefore, the slope is -3/4. This means that it takes 4/3 hours to make one pound of cheese (the inverse of the slope). Therefore, the correct answer is B, 3/4 hour.

Question 7

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 8

Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
   
-Refer to Figure 3-10.If point A represents Alice's current production and point B represents Betty's current production,under what circumstances can both Alice and Betty benefit from specialization and trade?
A) Alice produces more pizzas and Betty produces more lemonade.
B) Alice produces more lemonade and Betty produces more pizzas.
C) Both Alice and Betty produce only pizzas.
D) There are no circumstances under which both Alice and Betty can benefit from specialization and trade.

Accepted Answer

Both Alice and Betty can benefit from specialization and trade if Alice specializes in lemonade production and Betty specializes in pizza production. This way, Alice can produce more lemonade than pizza and Betty can produce more pizza than lemonade. They can then trade their excess production with each other, resulting in both of them having more of both goods than if they had stuck to their original production possibilities.

Question 9

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 10

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. Since the gardener gives up 14 bushels of corn to produce 5 bushels of green beans, the opportunity cost of 1 bushel of green beans is 14/5 or 2.8 bushels of corn. Therefore, the correct answer is B.

Question 11

A farmer has the ability to grow either corn or cotton or some combination of the two.Given no other information,it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton
A) is equal to 0.
B) is between 0 and 1.
C) is equal to 1.
D) is greater than 1.

Accepted Answer

The opportunity cost of a bushel of corn is the amount of cotton that the farmer must give up to produce one bushel of corn. Similarly, the opportunity cost of a bushel of cotton is the amount of corn that the farmer must give up to produce one bushel of cotton. Since the farmer can only grow corn or cotton, the opportunity cost of producing one bushel of corn is one bushel of cotton and the opportunity cost of producing one bushel of cotton is one bushel of corn. Therefore, the opportunity cost of a bushel of corn multiplied by the opportunity cost of a bushel of cotton is 1*1=1.

Question 12

Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
   
-Refer to Figure 3-10.If point A represents Alice's production and point B represents Betty's production,
A) Alice produces 200 pitchers of lemonade and 100 pizzas while Betty produces 180 pitchers of lemonade and 180 pizzas.
B) Alice produces 180 pitchers of lemonade and 180 pizzas while Betty produces 200 pitchers of lemonade and 100 pizzas.
C) Alice produces 100 pitchers of lemonade and 200 pizzas while Betty produces 180 pitchers of lemonade and 180 pizzas.
D) Only Alice can benefit from specialization and trade.

Accepted Answer

The answer of Figure 3-10
Alice and Betty's Production Possibilities in...

Question 13

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 answer of Suppose a gardener produces both green beans...

Question 14

Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds)that the nation of Bonovia could produce in a given month. 
-Refer to Figure 3-11.If the production possibilities frontier shown is for 240 hours of production,then which of the following combinations of ham and cheese could Bonovia produce in 240 hours?
A) 225 pounds of ham and 140 pounds of cheese
B) 280 pounds of ham and 100 pounds of cheese
C) 355 pounds of ham and 80 pounds of cheese
D) 330 pounds of ham and 60 pounds of cheese

Accepted Answer

The answer of Figure 3-11
The graph below represents the various...

Question 15

Assume for the United States that the opportunity cost of each airplane is 100 cars.Which of these pairs of points could be on the United States' production possibilities frontier?
A) (200 airplanes,5,000 cars)and (150 airplanes,4,000 cars)
B) (200 airplanes,10,000 cars)and (150 airplanes,20,000 cars)
C) (300 airplanes,15,000 cars)and (200 airplanes,25,000 cars)
D) (300 airplanes,25,000 cars)and (200 airplanes,40,000 cars)

Accepted Answer

Since the opportunity cost of each airplane is 100 cars, the slope of the production possibilities frontier would be -100 (the amount of cars given up for each airplane produced). Therefore, the only plausible points that could be on the production possibilities frontier would be those that have a slope of -100 between them (i.e. the amount of cars given up for each additional airplane produced is constant). Looking at the options given, only option C satisfies this requirement. The slope between (300 airplanes,15,000 cars) and (200 airplanes,25,000 cars) is indeed -100. The other options have slopes that are not equal to -100, so they cannot be on the production possibilities frontier.

Question 16

Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
   
-Refer to Figure 3-10.If Alice produces only lemonade,she can produce
A) 200 pitchers per day.
B) 300 pitchers per day.
C) 400 pitchers per day.
D) 450 pitchers per day.

Accepted Answer

Based on the graph, Alice can produce up to 400 pitchers of lemonade per day if she chooses to specialize in lemonade production. However, Betty is better at producing lemonade than Alice, as shown by the fact that Betty's lemonade production possibilities curve is higher. Therefore, it might be more efficient for Alice and Betty to divide their labor and have Alice focus on cookie production while Betty focuses on lemonade production. This would allow them to produce a combination of goods that is outside of both of their individual production possibilities curves, possibly increasing their overall output. However, if Alice were to specialize in only one good, lemonade would be her best choice with a potential production of 400 pitchers per day.

Question 17

Assume for Namibia that the opportunity cost of each hut is 200 bowls.Which of these pairs of points could be on Namibia's production possibilities frontier?
A) (200 huts,30,000 bowls)and (150 huts,35,000 bowls)
B) (200 huts,40,000 bowls)and (150 huts,30,000 bowls)
C) (300 huts,50,000 bowl)and (200 huts,60,000 bowls)
D) (300 huts,60,000 bowls)and (200 huts,80,000 bowls)

Accepted Answer

The answer of Assume for Namibia that the opportunity cost...

Question 18

Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds)that the nation of Bonovia could produce in a given month. 
-Refer to Figure 3-11.If the production possibilities frontier shown is for 240 hours of production,then which of the following combinations of ham and cheese could Bonovia not produce in 240 hours?
A) 250 pounds of ham and 120 pounds of cheese
B) 200 pounds of ham and 160 pounds of cheese
C) 160 pounds of ham and 200 pounds of cheese
D) 100 pounds of ham and 240 pounds of cheese

Accepted Answer

The answer of Figure 3-11
The graph below represents the various...

Question 19

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 20

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 per unit of output. It is essentially a measure of who can produce a good or service using fewer resources. Therefore, the correct answer is C.

Quiz 3: Interdependence and the Gains From Trade

If Korea is capable of producing either shoes or soccer balls or some combination of the two,then

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

What must be given up to obtain an item is called

The opportunity cost of an item is

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

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

Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.If point A represents Alice's current production and point B represents Betty's current production,under what circumstances can both Alice and Betty benefit from specialization and trade?

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

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 farmer has the ability to grow either corn or cotton or some combination of the two.Given no other information,it follows that the farmer's opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton

Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.If point A represents Alice's production and point B represents Betty's production,

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

Assume for the United States that the opportunity cost of each airplane is 100 cars.Which of these pairs of points could be on the United States' production possibilities frontier?

Figure 3-10 Alice and Betty's Production Possibilities in one 8-hour day. -Refer to Figure 3-10.If Alice produces only lemonade,she can produce

Assume for Namibia that the opportunity cost of each hut is 200 bowls.Which of these pairs of points could be on Namibia's production possibilities frontier?

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,

Absolute advantage is found by comparing different producers'