Question 1

The law of comparative advantage says that a person should produce a good if she

Accepted Answer

The law of comparative advantage states that a person should produce a good if she has the lowest opportunity cost of producing that good. Opportunity cost is the real cost of one good in terms of the other good forgone, or the value of the best alternative foregone. Therefore, the person who has the lowest opportunity cost has the comparative advantage in producing a good.

Question 2

If people specialize in producing those goods for which they possess a comparative advantage, then the economy as a whole can produce a greater quantity of goods.

Accepted Answer

This is the fundamental principle of comparative advantage. Specialization allows each person or country to produce goods at a lower opportunity cost, resulting in more efficient production and higher overall output.

Question 3

Comparative advantage is based on opportunity costs.

Accepted Answer

Comparative advantage refers to the ability of a country (or individual) to produce a certain good or service at a lower opportunity cost than another country (or individual). Opportunity cost is the cost of forgoing the next best alternative when making a decision, and is therefore intrinsically tied to the concept of comparative advantage.

Question 4

The law of comparative advantage says that

Accepted Answer

The law of comparative advantage states that the individual with the lowest opportunity cost of producing a particular good should produce it. This means that they can produce that good at a lower cost, either in terms of time or resources, and therefore, it is more efficient for them to specialize in that good and trade with others who have a comparative advantage in producing other goods.

Question 5

It is possible for one person to have an absolute advantage in two tasks and a comparative advantage in only one.

Accepted Answer

This is because absolute advantage refers to the ability of a person to produce a good or service using fewer resources than others, while comparative advantage refers to the ability of a person to produce a good or service at a lower opportunity cost than others. It is possible for someone to have an absolute advantage in multiple tasks due to their natural abilities or acquired skills, but they may have a comparative advantage in only one task because of differences in the opportunity cost of producing that task compared to others.

Question 6

The law of comparative advantage states that the person who should produce a good is the person who

Accepted Answer

The law of comparative advantage states that the producer who has the lowest opportunity cost of producing a good should produce that good. This means that the producer who gives up the least amount of other goods and services to produce one unit of a good has the comparative advantage in producing that good.

Question 7

If you and I agree to exchange four ginger snaps for one chocolate chip cookie, then it must be true that

Accepted Answer

The answer of If you and I agree to exchange...

Question 8

A person who can produce more of a good than another person is said to possess a comparative advantage.

Accepted Answer

The answer of A person who can produce more of...

Question 9

It is impossible for one person to have a comparative advantage in all tasks.

Accepted Answer

Comparative advantage is the ability of an individual, firm, or country to produce goods or services at a lower opportunity cost than others. Since opportunity cost is the cost of forgoing an alternative, it is impossible for one person to have a lower opportunity cost in all tasks. Therefore, it is impossible for one person to have a comparative advantage in all tasks.

Question 10

The opportunity cost of a particular activity

Accepted Answer

The answer of The opportunity cost of a particular activity
...

Question 11

If you enjoy playing golf, the opportunity cost of cleaning your room

Accepted Answer

The answer of If you enjoy playing golf, the opportunity...

Question 12

Comparative advantage is

Accepted Answer

Comparative advantage is the ability of an individual or a country to produce a particular good at a lower opportunity cost than some other individual or country. In other words, it is the ability to produce a good at a lower cost of production (in terms of other goods that could have been produced instead) compared to others. This allows for more efficient production and trade between individuals or countries.

Question 13

A university should not disband its football team if it has already paid for the stadium.

Accepted Answer

The answer of A university should not disband its football...

Question 14

It is possible for one person to have a comparative advantage in the production of all products?

Accepted Answer

It is not possible for one person to have a comparative advantage in the production of all products because comparative advantage is based on the concept of opportunity cost. Each product has a different opportunity cost for each producer, and therefore, each producer will have a different comparative advantage in each product.

Question 15

Sunk costs

Accepted Answer

The answer of Sunk costs
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Question 16

The opportunity cost of an activity is best measured

Accepted Answer

The opportunity cost of an activity is the value of the best alternative forgone, meaning the value that could have been gained from the next best option that was not chosen. It is not simply the monetary cost or the number of alternative activities forgone, but rather the value that was missed out on by choosing one option over another. Therefore, choice (D) is the best answer.

Question 17

It is possible for one person to have an absolute advantage in something even if she has no comparative advantage in anything.

Accepted Answer

The answer of It is possible for one person to...

Question 18

Melissa is a self-employed lawyer who chooses a higher-priced restaurant 2 miles from home over a cheaper restaurant 15 miles from home. Which of the following is the most likely explanation for her behavior?

Accepted Answer

The answer of Melissa is a self-employed lawyer who chooses...

Question 19

Suppose you have purchased a non-refundable plane ticket and, at the last moment, you cannot take the trip. You can, however, sell the ticket. If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket?

Accepted Answer

The answer of Suppose you have purchased a non-refundable plane...

Question 20

The term opportunity cost suggests that

Accepted Answer

The term opportunity cost refers to the fact that when resources are scarce, choosing to produce more of one good means giving up the opportunity to produce other goods with those resources. In other words, in order to get something, you have to give up something else – this is the essence of opportunity cost. Option A is incorrect since opportunity cost does not necessarily involve a situation where one person gains and someone else loses. Option B is incorrect because opportunity cost refers to the cost of the next best alternative, not a lack of ambition or initiative. Option C is incorrect as it does not accurately reflect the meaning of opportunity cost. Option D is incorrect because while cost is an important factor in decision making, it is not the only factor.

Quiz 2: Economic Tools and Economics Systems