Question 1

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

It is not possible for Jim to have an absolute advantage in both goods, as absolute advantage means being able to produce a good with fewer resources than another producer. Therefore, it is also not possible for Jim to have an absolute advantage in one good and a comparative advantage in the other, as comparative advantage means being able to produce a good at a lower opportunity cost than another producer. Therefore, the only possible option is for Jim to have a comparative advantage in both goods (D).

Question 2

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 3

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 4

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

The concept described in the question is opportunity cost, which refers to the value of the next best alternative that one must give up in order to pursue a certain action. This is a fundamental concept in economics, and understanding it is essential in making informed decisions about allocation of resources. Options A, B, and D do not accurately describe this concept.

Question 5

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

The opportunity cost of an item is what you give up in order to obtain that item. This can include other goods or services that you could have purchased with the same amount of money or the time and effort you could have spent on other activities. Option A is not entirely correct because the number of hours needed to purchase an item can vary depending on one's hourly wage. Option C is not correct because the opportunity cost can be greater than the dollar value of the item. Option D is also not correct because the cost of producing an item does not necessarily reflect the value that individuals place on it.

Question 6

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that
A) Ken has an absolute advantage in chairs.
B) Ken has a comparative advantage in tables.
C) Traci has an absolute advantage in chairs.
D) Traci has a comparative advantage in chairs.

Accepted Answer

The answer of Ken and Traci are two woodworkers who...

Question 7

Suppose a gardener produces both tomatoes and squash in his garden. If he must give up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1 bushel of tomatoes is
A) 0.63 bushels of squash.
B) 1.6 bushels of squash.
C) 3 bushels of squash.
D) 5 bushels of squash.

Accepted Answer

To find the opportunity cost of 1 bushel of tomatoes, we must calculate how many bushels of squash the gardener must give up for each bushel of tomatoes produced. To do this, we use the given ratio of 8 bushels of squash for every 5 bushels of tomatoes. 
Opportunity cost of 1 bushel of tomatoes = 8/5 bushels of squash
Opportunity cost of 1 bushel of tomatoes = 1.6 bushels of squash. 
Therefore, the correct answer is B, 1.6 bushels of squash.

Question 8

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

If Jim's opportunity cost of producing baseball bats is lower than Tom's opportunity cost of producing baseball bats, this means that Jim is better suited to producing baseball bats because he has a lower opportunity cost in doing so. Therefore, Jim has a comparative advantage in the production of baseball bats.

Question 9

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 producing one cantaloupe is 1.5 watermelons, which means the opportunity cost of one watermelon is 2/3 of a cantaloupe. This is the definition of opportunity cost - the value of the alternative foregone. Answers A, B, and D are all incorrect because they do not relate to the information given in the problem.

Question 10

Suppose a gardener produces both tomatoes and squash in his garden. If the opportunity cost of one bushel of squash is 2/5 bushel of tomatoes, then the opportunity cost of 1 bushel of tomatoes is
A) 2/5 bushel of squash.
B) 5/2 bushels of squash.
C) 2 bushels of squash.
D) 5 bushels of squash.

Accepted Answer

The opportunity cost of one bushel of squash is 2/5 bushels of tomatoes. This means that for every bushel of squash the gardener produces, he could have produced 2/5 bushels of tomatoes instead. Therefore, the opportunity cost of 1 bushel of tomatoes is the reciprocal of 2/5, which is 5/2 bushels of squash.

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 could have been produced instead, and vice versa. Since the farmer can only choose between the two crops, the opportunity cost of one will always be the inverse of the other. Therefore, the opportunity cost of a bushel of corn multiplied by the opportunity cost of a bushel of cotton will always be equal to 1.

Question 12

Assume for Brazil that the opportunity cost of each cashew is 100 peanuts. Which of these pairs of points could be on Brazil's production possibilities frontier?
A) 200 cashews, 30,000 peanuts) and 150 cashews, 35,000 peanuts)
B) 200 cashews, 40,000 peanuts) and 150 cashews, 30,000 peanuts)
C) 300 cashews, 60,000 peanut) and 200 cashews, 50,000 peanuts)
D) 300 cashews, 60,000 peanuts) and 200 cashews, 80,000 peanuts)

Accepted Answer

For every 1 cashew produced, Brazil gives up the opportunity to produce 100 peanuts. 
Therefore, the production possibilities frontier will have a negative slope of -100. 
Choice A has a slope of (-30,000+35,000)/(200-150) = 100, which is the opportunity cost of producing cashews. 
Choice B has a slope of (-30,000+40,000)/(200-150) = 200, which means for every 1 cashew produced, Brazil gives up the opportunity to produce 200 peanuts, which is not in line with the given opportunity cost. 
Choice C has a slope of (-50,000+60,000)/(200-300) = 100, which is the opportunity cost of producing cashews. 
Choice D has a slope of (-60,000+80,000)/(200-300) = 200, which again, is not in line with the given opportunity cost. 
Therefore, choice A is the only possible combination that fits the given opportunity cost of cashews and peanuts.

Question 13

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 14

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 is capable of producing either shoes or soccer balls or some combination of the two, then it must have different opportunity costs for producing each good. Therefore, it is important to compare the opportunity costs of producing the two goods to determine which good it has a comparative advantage in. The opportunity cost of producing one good is the inverse of the opportunity cost of producing the other good. By comparing the opportunity costs, Korea can determine which good it has a comparative advantage in and specialize in that good to benefit from trade. Therefore, the correct answer is D.

Question 15

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 table is
A) 1/6 chair for Ken and 1/3 chair for Traci.
B) 1/6 chair for Ken and 3 chairs for Traci.
C) 6 chairs for Ken and 1/3 chair for Traci.
D) 6 chairs for Ken and 3 chairs for Traci.

Accepted Answer

The answer of Ken and Traci are two woodworkers who...

Question 16

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 of different producers. This means comparing how much resources and inputs (such as labor, capital, and materials) are needed by each producer to produce one unit of a good or service. The producer that requires the least inputs to produce one unit of output has the absolute advantage in producing that good or service.

Question 17

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is
A) 1/6 table for Ken and 1/3 table for Traci.
B) 1/6 table for Ken and 3 tables for Traci.
C) 6 tables for Ken and 1/3 table for Traci.
D) 6 tables for Ken and 3 tables for Traci.

Accepted Answer

The opportunity cost of 1 chair is the amount of tables that could have been made instead. For Ken, the opportunity cost is 1/3 of a table (since he can make 3 tables or 18 chairs in one month) and for Traci, the opportunity cost is 1/8 of a table (since she can make 8 tables or 24 chairs in one month). Therefore, the opportunity cost of 1 chair is 1/3 table for Ken and 1/8 table for Traci. Since the question asks for the answer in terms of 1 chair, we need to find a common denominator, which is 24. So, the opportunity cost of 1 chair for Ken is 8/24 table or 1/3 table, and the opportunity cost of 1 chair for Traci is 3/24 table or 1/8 table. Therefore, the answer is A.

Question 18

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 19

A: Comparative Advantage: The Driving Force of Specialization
-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?
A) 200 airplanes, 5,000 cars) and 150 airplanes, 4,000 cars)
B) 200 airplanes, 12,500 cars) and 150 airplanes, 15,000 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 one airplane is 50 cars, the production possibilities frontier would have a slope of -50/1 or -1/2. This means that for every one airplane the United States produces, it gives up the opportunity to produce two cars. Therefore, the only option that fits this opportunity cost is B, where the United States produces 200 airplanes and 12,500 cars, or 150 airplanes and 15,000 cars. Both options result in an opportunity cost of 50 cars per airplane. Options A, C, and D all have an opportunity cost that does not match the given information.

Question 20

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, it is not possible for both individuals to have a comparative advantage in both activities. Since comparative advantage results from differences in opportunity cost, one person must have a lower opportunity cost in one activity and the other person must have a lower opportunity cost in the other activity. Therefore, option C is not possible.

Quiz 3: Interdependence and the Gains From Trade

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

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.

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,

What must be given up to obtain an item is called

The opportunity cost of an item is

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that

Suppose a gardener produces both tomatoes and squash in his garden. If he must give up 8 bushels of squash to get 5 bushels of tomatoes, then his opportunity cost of 1 bushel of tomatoes is

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

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

Suppose a gardener produces both tomatoes and squash in his garden. If the opportunity cost of one bushel of squash is 2/5 bushel of tomatoes, then the opportunity cost of 1 bushel of tomatoes 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

Assume for Brazil that the opportunity cost of each cashew is 100 peanuts. Which of these pairs of points could be on Brazil's production possibilities frontier?

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

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

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 table is

Absolute advantage is found by comparing different producers'

Ken and Traci are two woodworkers who both make tables and chairs. In one month, Ken can make 3 tables or 18 chairs, whereas Traci can make 8 tables or 24 chairs. Given this, we know that the opportunity cost of 1 chair is

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: Comparative Advantage: The Driving Force of Specialization -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?

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