Question 1

Which of the following terms of trade would enable the two countries illustrated in Figure 35.1 to trade with each other and increase consumption possibilities?

Accepted Answer

The answer of  Which of the following terms of...

Question 2

In Figure 35.1, what is the opportunity cost of motorcycles in the United States?

Accepted Answer

The answer of  In Figure 35.1, what is the...

Question 3

Assume South Korea and Vietnam have the same amount of resources.In a given time period, South Korea can produce 100,000 jackets or 1,000,000 shirts.Vietnam can produce 200,000 jackets or 2,000,000 shirts.This means that

Accepted Answer

Vietnam can produce more jackets and more shirts than South Korea with the same amount of resources, indicating Vietnam has an absolute advantage in both products.

Question 4

Assume the United States and Australia have the same amount of resources.In a given time period, the United States can produce 2 tons of beef or 200,000 cars.Australia can produce 1 ton of beef or 100,000 cars.This means that

Accepted Answer

The United States can produce more of both beef and cars than Australia with the same amount of resources, indicating an absolute advantage in both goods.

Question 5

Assume the United States and Canada have the same amount of resources.In a given time period, the United States can produce 3 tons of steel or 300 tons of wheat.Canada can produce 4 tons of steel or 400 tons of wheat.This means that

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The answer of Assume the United States and Canada have...

Question 6

Suppose China can produce either 600 telephones or 400 DVD players, and Japan can produce either 400 telephones or 200 DVD players.Implicitly, China has

Accepted Answer

China has an absolute advantage in DVD players because it can produce more DVD players than Japan (400 vs. 200), and it also has a comparative advantage in DVD players because it has a lower opportunity cost of producing DVD players compared to telephones (it only needs to give up 2/3 of a telephone to produce one DVD player, whereas Japan needs to give up 2 telephones to produce one DVD player). Therefore, China should focus on producing DVD players and trade with Japan for telephones, as Japan has a comparative advantage in telephones (it only needs to give up 1/2 of a DVD player to produce one telephone). This will result in both countries being able to consume more of both goods than if they tried to produce everything domestically.

Question 7

Which of the following best describes the comparative advantage of the two countries illustrated in Figure 35.1?

Accepted Answer

According to the figure, Japan has a lower opportunity cost in producing motorcycles compared to DVD players, while the United States has a lower opportunity cost in producing DVD players compared to motorcycles. Hence, Japan has a comparative advantage in producing motorcycles and the United States in producing DVD players.

Question 8

Suppose China can produce 200 TVs or 200 DVD players.South Korea can produce either 100 TVs or 200 DVD players.In terms of TV production we can conclude that

Accepted Answer

To determine who has a comparative advantage in the production of TVs, we need to look at the opportunity cost of producing a TV in each country. For China, the opportunity cost of producing 1 TV is giving up the production of 1 DVD player (since they can produce either 200 TVs or 200 DVD players). For South Korea, the opportunity cost of producing 1 TV is giving up the production of 0.5 DVD players (since they can produce either 100 TVs or 200 DVD players). Therefore, South Korea has a higher opportunity cost for producing TVs than China, meaning China has a comparative advantage in TV production.

Question 9

Suppose the United States can produce 2,000 cars or 2,000 trucks.Japan can produce either 2,000 cars or 1,000 trucks.In terms of car production we can conclude that

Accepted Answer

The answer of Suppose the United States can produce 2,000...

Question 10

The United States has an absolute advantage in producing T-shirts, but not a comparative advantage, because

Accepted Answer

Comparative advantage refers to the ability of a country to produce a particular good at a lower opportunity cost than another country. In this case, even though the United States may have an absolute advantage in producing T-shirts (meaning that it can produce them with fewer resources than other countries), another country like China can produce T-shirts at a lower opportunity cost relative to the United States. Therefore, the United States does not have a comparative advantage in producing T-shirts.

Question 11

Suppose China can produce either 300 telephones or 200 DVD players, and Japan can produce either 200 telephones or 100 DVD players.Implicitly, Japan has

Accepted Answer

Comparative advantage is determined by the opportunity cost of producing a particular good. Japan has a lower opportunity cost of producing telephones than China, as for every 1 unit of telephones Japan gives up only 0.5 units of DVD players whereas China gives up 1.5 units of DVD players. Therefore, Japan has a comparative advantage in producing telephones, even though it may not have an absolute advantage.

Question 12

If the two countries are at points A and B in Figure 35.1 and do not trade, what is the total number of motorcycles produced per year?

Accepted Answer

If the two countries are not importing or exporting motorcycles, then each country is producing for its own domestic market. Country A is producing 1,500 motorcycles and country B is producing 1,500 motorcycles. Therefore, the total number of motorcycles produced per year is 3,000 (1,500 + 1,500) bicycles. Thus, the best choice is C.

Question 13

Suppose the production of 12 tons of copper in the United States requires the same amount of resources as the production of 3 tons of aluminum.In Mexico, 12 tons of copper requires the same amount of resources as 2 tons of aluminum.Implicitly

Accepted Answer

The information given suggests that Mexico can produce copper more efficiently relative to aluminum than the United States can. This is an example of comparative advantage, where a country can produce a good at a lower opportunity cost (the amount of other goods given up to produce it) than another country. Therefore, choice A is the best answer. The information does not provide enough evidence to determine absolute advantage or comparative advantage in aluminum production, so choices B, C, and D cannot be supported.

Question 14

In Figure 35.1, what is the opportunity cost of DVD players in Japan?

Accepted Answer

According to the graph in Figure 35.1, the opportunity cost of DVD players in Japan is 2 motorcycles. Therefore, the best choice would be to import DVD players from the United States, since the opportunity cost of DVD players in the US is only 1 motorcycle per DVD player.

Question 15

The expansion of world output as a result of trade is mainly due to the effects of

Accepted Answer

The expansion of world output as a result of trade is mainly due to specialization according to comparative advantage, where countries produce the goods and services in which they have a relative efficiency compared to other countries. This allows for efficient allocation of resources and increased productivity, leading to higher output and economic growth. Higher trade barriers (A) actually hinder trade and reduce output, while improved terms of trade (B) may lead to redistribution of gains rather than overall expansion of output. Specialization according to absolute advantage (D) may lead to trade but does not necessarily result in increased output.

Question 16

When one country can produce a given amount of a good using fewer inputs than any other country,

Accepted Answer

When one country can produce a given amount of a good using fewer inputs than any other country, it has an absolute advantage in producing the good. However, this does not necessarily mean that it will always have a comparative advantage in producing the good or that specialization will definitely increase production or consumption possibilities. Comparative advantage takes into account the opportunity cost of producing the good, and specialization may lead to changes in trade patterns, prices, and production possibilities that are difficult to predict.

Question 17

A country with a comparative advantage in producing computer chips

Accepted Answer

A country with a comparative advantage in producing computer chips means that it can produce computer chips with a lower opportunity cost than its trading partners. This means that the country can produce computer chips at a lower cost in terms of other possible goods or services that it could have produced instead. As a result, the country can specialize in the production of computer chips and trade with other countries, leading to gains from trade for both parties, as they can benefit from each other's comparative advantages.

Question 18

Which of the following statements is true for the two countries illustrated in Figure 35.1?

Accepted Answer

The United States has a lower opportunity cost for producing DVD players than motorcycles, while Japan has a lower opportunity cost for producing motorcycles than DVD players. Therefore, the United States has a comparative advantage in DVD players, while Japan has a comparative advantage in motorcycles. The question does not mention the absolute advantage of either country, so option C can be eliminated. Option A and D mention incorrect information.

Question 19

Suppose Russia can produce either 600 pianos or 400 HDTVs, and Italy can produce either 300 pianos or 150 HDTVs.Implicitly, Russia has

Accepted Answer

Russia can produce both pianos and HDTVs more efficiently than Italy, but it has a relative advantage in producing HDTVs, as it has a higher opportunity cost in terms of pianos foregone when producing HDTVs. In other words, if Russia wants to produce more HDTVs, it would have to give up more pianos compared to Italy giving up less pianos when producing more HDTVs. Therefore, Russia has a comparative advantage in producing HDTVs.

Question 20

In Figure 35.1, what is the opportunity cost of motorcycles in Japan?

Accepted Answer