Question 1

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 both specialize in the good in which they have a comparative advantage,what would the total consumption be?
A) 4 ballet slippers and 6 tap shoes
B) 6 ballet slippers and 6 tap shoes
C) 8 ballet slippers and 8 tap shoes
D) 8 ballet slippers and 10 tap shoes

Accepted Answer

The answer of Figure 3-5
These graphs illustrate the production possibilities...

Question 2

Currently,a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre.If he were able to trade 70 bushels of corn for 30 bushels of wheat,would he be better off or worse off?
A) worse off,because his opportunity cost of wheat would increase from 2.33 bushels of corn to 3 bushels of corn
B) better off,because his opportunity cost of wheat would fall from 80 bushels to 50 bushels
C) better off,because his opportunity cost of wheat would fall from 3 bushels of corn to 2.33 bushels
D) worse off,because his opportunity cost of wheat would increase from 50 bushels of corn to 80 bushels of corn

Accepted Answer

The opportunity cost of wheat is currently 3 bushels of corn (120/40). If the farmer trades 70 bushels of corn for 30 bushels of wheat, he will have 50 bushels of corn left. The opportunity cost of wheat will now be 2.33 bushels of corn (50/30), which means it has decreased. Therefore, he is better off.

Question 3

South Korea can produce shoes,clothes,TV sets,and computers cheaper than any other country.What would one expect South Korea to export?
A) all of these goods
B) none of these goods
C) some of these and other goods
D) some of these but no other goods

Accepted Answer

While South Korea can produce these goods cheaper than any other country, it doesn't necessarily mean that they will export only these goods. It is likely that they will export some of these goods but also export other goods that they have a comparative advantage in producing, such as electronics, automobiles, and steel products. Therefore, some of these and other goods is the best choice.

Question 4

Table 3-4  ​
-Refer to the table.Who has a comparative advantage in the production of each good?
A) Alberta has a comparative advantage in baskets,and Manitoba has a comparative advantage in birdhouses.
B) Alberta has a comparative advantage in birdhouses,and Manitoba has a comparative advantage in baskets.
C) Alberta has a comparative advantage in neither good,and Manitoba has a comparative advantage in both goods.
D) Alberta has a comparative advantage in both goods,and Manitoba has a comparative advantage in neither good.

Accepted Answer

According to the table, the opportunity cost of producing one basket is 1 birdhouse in Alberta and 2 birdhouses in Manitoba. Therefore, Alberta has a lower opportunity cost in producing baskets and a comparative advantage in baskets. Similarly, the opportunity cost of producing one birdhouse is 1.5 baskets in Manitoba and 3 baskets in Alberta. Therefore, Manitoba has a lower opportunity cost in producing birdhouses and a comparative advantage in birdhouses.

Question 5

Table 3-4  ​
-Refer to the table.What is the opportunity cost of one birdhouse for Manitoba?
A) 3 / 4 basket
B) 1 basket
C) 4 / 3 baskets
D) 3 baskets

Accepted Answer

The opportunity cost of one birdhouse for Manitoba is 3/4 basket of berries. Therefore, Manitoba should choose to produce baskets of berries instead of birdhouses since the opportunity cost is lower.

Question 6

Shawn can produce donuts at a lower opportunity cost than Sue.Who has an absolute or a comparative advantage in the production of donuts?
A) Shawn has a comparative advantage.
B) Sue has a comparative advantage.
C) Shawn has an absolute advantage.
D) Sue has an absolute advantage.

Accepted Answer

The answer of Shawn can produce donuts at a lower...

Question 7

Table 3-4  ​
-Refer to the table.What is the opportunity cost of one basket for Manitoba?
A) 1 / 4 birdhouse
B) 3 / 4 birdhouse
C) 1 birdhouse
D) 4 / 3 birdhouses

Accepted Answer

The answer of Table 3-4  ​
-Refer to the table.What...

Question 8

Table 3-4  ​
-Refer to the table.What is the opportunity cost of one birdhouse for Alberta?
A) 1 / 3 basket
B) 1 basket
C) 4 / 3 baskets
D) 3 baskets

Accepted Answer

The answer of Table 3-4  ​
-Refer to the table.What...

Question 9

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

Accepted Answer

To determine who has an absolute advantage in the production of each good, we look for who can produce each good with fewer resources (time/labor/materials) than the other. According to the table, Alberta can produce 2 birdhouses or 1 basket in 1 hour, while Manitoba can produce 1 birdhouse or 2 baskets in 1 hour. This means that Alberta has an absolute advantage in baskets (can produce one in half the time it takes Manitoba) and Manitoba has an absolute advantage in birdhouses (can produce one in half the time it takes Alberta). Therefore, the correct answer is B where Alberta has an absolute advantage in baskets,and Manitoba has an absolute advantage in birdhouses.

Question 10

What is trade based on?
A) absolute advantage
B) comparative advantage
C) production costs
D) relative dollar prices

Accepted Answer

Trade is based on comparative advantage, which means that each country specializes in producing the goods or services in which it has a lower opportunity cost compared to other countries. This leads to greater efficiency and increased production, benefiting all countries involved in the trade. Trade based on absolute advantage, production costs, or relative dollar prices may still occur, but comparative advantage is the most widely accepted theory of trade.

Question 11

Table 3-4  ​
-Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will be exported?
A) Alberta will export baskets,and Manitoba will export birdhouses.
B) Alberta will export birdhouses,and Manitoba will export baskets.
C) Alberta will export neither good,and Manitoba will export both goods.
D) Alberta will export both goods,and Manitoba will export neither good.

Accepted Answer

According to the principle of comparative advantage, each province should specialize in producing the good they have a lower opportunity cost in producing. In this case, Alberta has a lower opportunity cost in producing baskets (4/2=2) compared to Manitoba (4/1=4) and Manitoba has a lower opportunity cost in producing birdhouses (2/1=2) compared to Alberta (2/4=0.5). Therefore, Alberta should specialize in producing baskets and Manitoba should specialize in producing birdhouses. Hence, answer choice A is correct.

Question 12

Table 3-4  ​
-Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will happen?
A) All individuals in both provinces will gain.
B) No one in either province will gain.
C) Some individuals within both provinces will be made worse off.
D) One province will be better off,and the other province will be worse off.

Accepted Answer

The answer of Table 3-4  ​
-Refer to the table.If...

Question 13

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?
A) 0.82 watermelons
B) 1.08 watermelons
C) 1.50 watermelons
D) 2.00 watermelons

Accepted Answer

The opportunity cost is defined as the cost of the next best alternative foregone. In this case, the farmer can either produce 65 cantaloupes or 70 watermelons. Therefore, the opportunity cost of 1 cantaloupe is the number of watermelons foregone to produce that 1 cantaloupe.

To calculate the opportunity cost, we need to find the ratio of the number of watermelons to the number of cantaloupes.

Opportunity cost of 1 cantaloupe = Number of watermelons foregone / Number of cantaloupes produced

Opportunity cost of 1 cantaloupe = 70/65

Opportunity cost of 1 cantaloupe = 1.08 watermelons

Therefore, the answer is B, and the opportunity cost of 1 cantaloupe to the farmer is 1.08 watermelons.

The best choice for the farmer depends on the market demand and prices for cantaloupes and watermelons. However, based on the information provided, the farmer should produce watermelons as they have a lower opportunity cost.

Question 14

For two people who are planning to trade two different goods,when will there NOT be a comparative advantage for either?
A) if they have exactly the same opportunity cost
B) if they have agreed in advance on who will produce what and how much each will produce
C) if the terms of trade are such that neither can gain from trade
D) if one person has an absolute advantage in both products

Accepted Answer

Comparative advantage exists when one person has a lower opportunity cost for producing a good than the other person. If they have exactly the same opportunity cost, then neither person has a comparative advantage in producing either good.

Question 15

Table 3-4  ​
-Refer to the table.What is the opportunity cost of one basket for Alberta?
A) 1 / 3 birdhouse
B) 1 birdhouse
C) 3 birdhouses
D) 4 birdhouses

Accepted Answer

The answer of Table 3-4  ​
-Refer to the table.What...

Question 16

Suppose a gardener produces both green beans and corn in her garden.If the opportunity cost of one bushel of corn is 2 / 3 bushel of green beans,what is the opportunity cost of 1 bushel of green beans?
A) 2 / 5 bushel of corn
B) 8 / 5 bushels of corn
C) 3 / 2 bushels of corn
D) 5 / 3 bushels of corn

Accepted Answer

Since the opportunity cost of one bushel of corn is 2/3 bushel of green beans, we can find the opportunity cost of one bushel of green beans by taking the reciprocal of 2/3, which is 3/2. Therefore, the best choice is C) 3/2 bushels of corn.

Question 17

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 both specialize in the good in which they have a comparative advantage,what would the total production be?
A) 6 ballet slippers and 6 tap shoes
B) 8 ballet slippers and 6 tap shoes
C) 8 ballet slippers and 8 tap shoes
D) 8 ballet slippers and 10 tap shoes

Accepted Answer

The answer of Figure 3-5
These graphs illustrate the production possibilities...

Question 18

What economic concept is the most relevant when defining comparative advantage?
A) opportunity cost
B) equity
C) scarcity
D) efficiency

Accepted Answer

Comparative advantage refers to a country's ability to produce a good or service at a lower opportunity cost than another country. Therefore, the most relevant economic concept when defining comparative advantage is opportunity cost.

Question 19

What is comparative advantage based on?
A) capital costs
B) labour costs
C) dollar price
D) opportunity costs

Accepted Answer

Comparative advantage is based on opportunity costs, which means the cost of producing one unit of a good in terms of the foregone production of another good. This is because countries specialize in and export the goods that they can produce at the lowest opportunity cost compared to other countries.

Question 20

Suppose a gardener produces both green beans and corn in her garden.If she must give up 15 bushels of corn to get 5 bushels of green beans,what is the opportunity cost of 1 bushel of green beans?
A) 1 / 3 bushel of corn
B) 3 bushels of corn
C) 8 bushels of corn
D) 18 bushels of corn

Accepted Answer

The opportunity cost of 1 bushel of green beans is the amount of corn she must give up to produce it. Since she must give up 15 bushels of corn to produce 5 bushels of green beans, the opportunity cost of 1 bushel of green beans is 3 bushels of corn (15/5). Therefore, the best choice is B.

Quiz 3: Interdependence and the Gains From Trade

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 both specialize in the good in which they have a comparative advantage,what would the total consumption be?

Currently,a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre.If he were able to trade 70 bushels of corn for 30 bushels of wheat,would he be better off or worse off?

South Korea can produce shoes,clothes,TV sets,and computers cheaper than any other country.What would one expect South Korea to export?

Table 3-4 -Refer to the table.Who has a comparative advantage in the production of each good?

Table 3-4 -Refer to the table.What is the opportunity cost of one birdhouse for Manitoba?

Shawn can produce donuts at a lower opportunity cost than Sue.Who has an absolute or a comparative advantage in the production of donuts?

Table 3-4 -Refer to the table.What is the opportunity cost of one basket for Manitoba?

Table 3-4 -Refer to the table.What is the opportunity cost of one birdhouse for Alberta?

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

What is trade based on?

Table 3-4 -Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will be exported?

Table 3-4 -Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will happen?

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?

For two people who are planning to trade two different goods,when will there NOT be a comparative advantage for either?

Table 3-4 -Refer to the table.What is the opportunity cost of one basket for Alberta?

Suppose a gardener produces both green beans and corn in her garden.If the opportunity cost of one bushel of corn is 2 / 3 bushel of green beans,what is the opportunity cost of 1 bushel of green beans?

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 both specialize in the good in which they have a comparative advantage,what would the total production be?

What economic concept is the most relevant when defining comparative advantage?

What is comparative advantage based on?

Suppose a gardener produces both green beans and corn in her garden.If she must give up 15 bushels of corn to get 5 bushels of green beans,what is the opportunity cost of 1 bushel of green beans?

Quiz 3: Interdependence and the Gains From Trade

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 both specialize in the good in which they have a comparative advantage,what would the total consumption be?

Currently,a farmer can either grow 40 bushels of wheat or 120 bushels of corn per acre.If he were able to trade 70 bushels of corn for 30 bushels of wheat,would he be better off or worse off?

South Korea can produce shoes,clothes,TV sets,and computers cheaper than any other country.What would one expect South Korea to export?

Table 3-4 ​ -Refer to the table.Who has a comparative advantage in the production of each good?

Table 3-4 ​ -Refer to the table.What is the opportunity cost of one birdhouse for Manitoba?

Shawn can produce donuts at a lower opportunity cost than Sue.Who has an absolute or a comparative advantage in the production of donuts?

Table 3-4 ​ -Refer to the table.What is the opportunity cost of one basket for Manitoba?

Table 3-4 ​ -Refer to the table.What is the opportunity cost of one birdhouse for Alberta?

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

What is trade based on?

Table 3-4 ​ -Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will be exported?

Table 3-4 ​ -Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will happen?

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?

For two people who are planning to trade two different goods,when will there NOT be a comparative advantage for either?

Table 3-4 ​ -Refer to the table.What is the opportunity cost of one basket for Alberta?

Suppose a gardener produces both green beans and corn in her garden.If the opportunity cost of one bushel of corn is 2 / 3 bushel of green beans,what is the opportunity cost of 1 bushel of green beans?

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 both specialize in the good in which they have a comparative advantage,what would the total production be?

What economic concept is the most relevant when defining comparative advantage?

What is comparative advantage based on?

Suppose a gardener produces both green beans and corn in her garden.If she must give up 15 bushels of corn to get 5 bushels of green beans,what is the opportunity cost of 1 bushel of green beans?

Table 3-4 -Refer to the table.Who has a comparative advantage in the production of each good?

Table 3-4 -Refer to the table.What is the opportunity cost of one birdhouse for Manitoba?

Table 3-4 -Refer to the table.What is the opportunity cost of one basket for Manitoba?

Table 3-4 -Refer to the table.What is the opportunity cost of one birdhouse for Alberta?

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

Table 3-4 -Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will be exported?

Table 3-4 -Refer to the table.If Alberta and Manitoba trade based on the principle of comparative advantage,what will happen?

Table 3-4 -Refer to the table.What is the opportunity cost of one basket for Alberta?