Question 1

Suppose Joe can prepare 10 sandwiches or 5 pizzas in an hour and Beth can produce 12 sandwiches or 9 pizzas. Which of the following is true?
A) Beth should produce pizza because she has a higher opportunity cost of producing pizza than does Joe.
B) Beth should produce pizza because she has a lower opportunity cost of producing pizza than does Joe.
C) Joe should produce pizza because he has a higher opportunity cost of producing pizza than does Beth.
D) Joe should produce pizza because he has a lower opportunity cost of producing pizza than does Beth.

Accepted Answer

Beth has a lower opportunity cost of producing pizza than Joe because she can produce 9 pizzas in the time it takes Joe to produce 5 pizzas or 10 sandwiches, meaning she can produce more pizzas per hour than Joe. Therefore, she should specialize in producing pizzas.

Question 2

A person has a comparative advantage in an activity whenever he or she
A) has an absolute advantage in the activity.
B) can perform the activity at a lower opportunity cost than can anyone else.
C) can do the activity in less time than anyone else.
D) can do everything better than anyone else.

Accepted Answer

Comparative advantage is determined by the opportunity cost of producing a good or service. If someone can produce a good or service at a lower opportunity cost than someone else, they have a comparative advantage in that activity. Absolute advantage (choice A) is not relevant for determining comparative advantage. Doing an activity quickly (choice C) or doing everything better (choice D) does not necessarily mean that the person has a lower opportunity cost in producing the good or service.

Question 3

Comparative advantage is
A) the ability to perform an activity at a lower opportunity cost than anyone else.
B) the ability to perform an activity at a higher opportunity cost than anyone else.
C) the ability to perform an activity at a zero opportunity cost.
D) another name for absolute advantage.

Accepted Answer

Comparative advantage refers to the ability to produce a good or service at a lower opportunity cost (i.e. giving up fewer resources) than someone else. It is different from absolute advantage, which refers to the ability to produce more of a good or service with the same resources. Therefore, choice A is correct in defining comparative advantage as the ability to perform an activity at a lower opportunity cost than anyone else.

Question 4

In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves. Alice has ________ advantage in producing ________.
A) an absolute; shoes
B) a comparative; shoes
C) an absolute; bookshelves
D) a comparative; bookshelves

Accepted Answer

The answer of In one week Alice can produce 5...

Question 5

Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is
A) 2 pizzas.
B) 1/2 pizza.
C) 5 pizzas.
D) 1 pizza.

Accepted Answer

The opportunity cost of producing one sandwich for Joe is the amount of pizza he has to give up to make one sandwich. Since Joe can make 5 pizzas in the time it takes him to make 10 sandwiches, the opportunity cost of one sandwich is 1/2 pizza (5 pizzas / 10 sandwiches = 1/2 pizza per sandwich).

Question 6

Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?
A) guitars
B) cellos
C) both goods
D) neither good

Accepted Answer

Country A has a comparative advantage in guitars because it has a lower opportunity cost (1/5 of a cello per guitar) compared to Country B's opportunity cost for producing guitars (4 cellos per guitar).

Question 7

Which of the following describes comparative advantage?
A) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn.
B) Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.
C) Firm A can produce a good at a cost of $3 and Firm B can produce the good at a cost of $4.
D) Jane can type 50 words per minute and Joe can type 60 words per minute.

Accepted Answer

Comparative advantage refers to the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than others. In this case, Farmer John has a comparative advantage in producing wheat because he only has to give up 2 bushels of corn to produce a bushel of wheat, whereas Farmer Ben has to give up 3 bushels of corn to produce the same amount of wheat. Therefore, Farmer John should specialize in producing wheat while Farmer Ben should specialize in producing corn, resulting in a more efficient allocation of resources. The other options do not provide information about opportunity cost and cannot be used to determine comparative advantage.

Question 8

A person has a comparative advantage in an activity if that person can
A) produce more goods in a given amount of time than another person.
B) produce fewer goods in a given amount of time than another person.
C) perform the activity at a lower opportunity cost than anyone else.
D) perform that activity at a higher opportunity cost than anyone else.

Accepted Answer

Comparative advantage is the ability of an individual, firm or country to produce a good or service at a lower opportunity cost than another individual, firm or country. This means that they can produce that good or service with relatively lower sacrifice and can give up fewer resources to produce it. Therefore, the person with the lowest opportunity cost has the comparative advantage.

Question 9

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if
A) Tom trades sandwiches in exchange for eggs.
B) Jerry trades sandwiches in exchange for eggs.
C) they trade, no matter who trades sandwiches and who eggs.
D) they don't trade.

Accepted Answer

The answer of Tom takes 20 minutes to cook an...

Question 10

Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A
A) has a lower opportunity cost of producing good X than has B.
B) has a lower opportunity cost of producing good X than of producing good Y.
C) can produce more units of X in a given time period than can B.
D) can produce X using newer technology than can B.

Accepted Answer

Comparative advantage is based on opportunity cost, which is the value of the next best alternative given up in order to produce a certain good. A has a comparative advantage in producing good X if they have a lower opportunity cost of producing good X compared to B. In other words, if A gives up less of producing another good to produce X compared to B. Therefore, option A is the correct answer.

Question 11

A person has a comparative advantage in producing a particular good if that person
A) has higher productivity in producing it than anyone else has.
B) can produce it at lower opportunity cost than anyone else can.
C) has less desire to consume that good than anyone else has.
D) has more human capital related to that good than anyone else has.

Accepted Answer

Comparative advantage is the ability of an individual, firm, or country to produce a particular good at a lower opportunity cost than another. This means that the individual can produce more of a particular good compared to the other goods foregone in production at a lower cost than another person or country. Therefore, option B is the correct answer. Options A, C, and D are incorrect as they do not fully capture the concept of comparative advantage.

Question 12

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. Andy has a comparative advantage in the production of
A) bread, while Bob has a comparative advantage in the production of butter.
B) butter, while Bob has a comparative advantage in the production of bread.
C) bread, and neither has a comparative advantage in the production of butter.
D) both bread and butter.

Accepted Answer

The answer of In an eight-hour day, Andy can produce...

Question 13

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Tom has a comparative advantage in ________ and Jerry has a comparative advantage in ________.
A) cooking eggs; making sandwiches
B) making sandwiches; cooking eggs
C) neither of these activities; both activities
D) both activities; neither of these activities

Accepted Answer

Tom takes less time to cook an egg than Jerry, so he has a comparative advantage in cooking eggs. Similarly, Jerry takes less time to make a sandwich than Tom, so he has a comparative advantage in making sandwiches. Therefore, the answer is A - Tom has a comparative advantage in cooking eggs, and Jerry has a comparative advantage in making sandwiches.

Question 14

The opportunity cost of producing one ton of wheat for Country Gamma is 4 tons of corn. The opportunity cost of producing one ton of wheat for Country Beta is 8 tons of corn. Which country has the comparative advantage in the production of wheat?
A) Gamma
B) Beta
C) Neither country has a comparative advantage.
D) Both countries have the comparative advantage.

Accepted Answer

Country Gamma has a lower opportunity cost of producing one ton of wheat than Country Beta. This means that Country Gamma has a comparative advantage in the production of wheat as it can produce it at a lower opportunity cost than Country Beta.

Question 15

Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can produce 36 sandwiches or 27 pizzas. The concept of comparative advantage concludes that
A) Beth should produce both goods because she can produce more of both goods in an hour than can Joe.
B) Beth should produce sandwiches and Joe should produce pizza.
C) Beth should produce pizza and Joe should produce sandwiches.
D) Beth should produce both goods and Joe should produce sandwiches.

Accepted Answer

To find out who has the comparative advantage, we need to compare their opportunity costs.

Joe has an opportunity cost of 2 sandwiches for every pizza he produces (20/10).

Beth has an opportunity cost of 1.5 sandwiches for every pizza she produces (36/27).

Since Beth has a lower opportunity cost for producing pizzas, she has the comparative advantage in pizza production. Therefore, she should focus on producing pizzas and Joe should focus on producing sandwiches. Hence, Choice C is the best option.

Question 16

A country possesses a comparative advantage in the production of a good if
A) the opportunity cost in terms of forgone output of alternative goods is lower for this country than it is for its trading partners.
B) it possesses an absolute advantage in the production of this good.
C) it is able to produce more of this good per hour than can any other country.
D) all of the above

Accepted Answer

Comparative advantage is based on the opportunity cost, which refers to the forgone output of alternative goods. Therefore, A is the correct answer because it states that the country has a lower opportunity cost for producing the good compared to its trading partners. B is incorrect because absolute advantage is not sufficient to determine comparative advantage. C is also incorrect because producing more per hour does not necessarily mean that a country has a comparative advantage.

Question 17

Because of the existence of comparative advantage, the total output of goods is higher when each producer
A) produces many different goods.
B) produces at the midpoint of its PPF.
C) specializes in the production of one good or a few goods.
D) makes both intermediate and final goods.

Accepted Answer

Comparative advantage suggests that each country should specialize in producing goods where they have a lower opportunity cost compared to other countries. This results in increased efficiency, higher productivity, and lower costs, leading to a higher overall output of goods. When countries specialize in the production of one good or a few goods, they can focus their resources and expertise, leading to greater efficiency and productivity. Therefore, choice C is the best choice.

Question 18

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade
A) Tom will benefit and Jerry will not.
B) Jerry will benefit and Tom will not.
C) both will benefit.
D) none of them will benefit.

Accepted Answer

Tom is better at making sandwiches, taking only 5 minutes compared to Jerry's 3 minutes. Meanwhile, Jerry is better at cooking eggs, taking only 15 minutes compared to Tom's 20 minutes. Therefore, if Tom and Jerry trade tasks, they will both benefit as they will be able to complete their tasks in a shorter amount of time. Tom can make sandwiches for both of them in 5 minutes while Jerry cooks both eggs in 30 minutes, resulting in a total of 35 minutes. Compared to their individual times of 25 minutes for Tom and 18 minutes for Jerry, this is a significant improvement.

Question 19

The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta. Which of the following should be the manager's choice?
A) Fire David because he is not as productive as John. John will do both jobs.
B) John will make pizza because he has comparative advantage in making pizza.
C) David will make pizza because he has comparative advantage in making pizza.
D) John and David both will spend half their time making pizza and half their time making pasta because each has a comparative advantage in making pizza.

Accepted Answer

David has a comparative advantage in making pizza since he can make them at a lower opportunity cost than making pasta (20 pizzas versus 30 servings of pasta), while John has a comparative advantage in making pasta (25 pizzas versus 40 servings of pasta). Therefore, the manager should assign David to make pizzas and John to make pasta. This means that they will be able to produce more total output than if one person did both tasks.

Question 20

An economy produces only food and shelter. There are two individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bill's opportunity cost of producing 1 unit of shelter is 4 units of food.
A) Bill has a comparative advantage over Mary in the production of shelter.
B) Mary has a comparative advantage over Bill in the production of food.
C) Mary has a comparative advantage over Bill in the production of shelter.
D) Bill has an absolute advantage over Mary in the production of shelter.

Accepted Answer

Mary has a lower opportunity cost for producing shelter (2 units of food) compared to Bill's higher opportunity cost (4 units of food), indicating Mary's comparative advantage in shelter production.

Quiz 2: The Economic Problem

Suppose Joe can prepare 10 sandwiches or 5 pizzas in an hour and Beth can produce 12 sandwiches or 9 pizzas. Which of the following is true?

A person has a comparative advantage in an activity whenever he or she

Comparative advantage is

In one week Alice can produce 5 pairs of shoes or 4 bookshelves while Roger can produce 10 pairs of shoes or 6 bookshelves. Alice has advantage in producing .

Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is

Country A can produce 1 cello by giving up the production of 5 guitars. Country B can produce 1 guitar by giving up the production of 4 cellos. In which good does country A have a comparative advantage?

Which of the following describes comparative advantage?

A person has a comparative advantage in an activity if that person can

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Both individuals will be better off if

Individuals A and B both produce good X. A has a comparative advantage in the production of good X if A

A person has a comparative advantage in producing a particular good if that person

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, Bob can produce either 8 loaves of bread or 8 pounds of butter. Andy has a comparative advantage in the production of

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. Tom has a comparative advantage in and Jerry has a comparative advantage in .

The opportunity cost of producing one ton of wheat for Country Gamma is 4 tons of corn. The opportunity cost of producing one ton of wheat for Country Beta is 8 tons of corn. Which country has the comparative advantage in the production of wheat?

Suppose Joe can prepare 20 sandwiches or 10 pizzas in an hour and Beth can produce 36 sandwiches or 27 pizzas. The concept of comparative advantage concludes that

A country possesses a comparative advantage in the production of a good if

Because of the existence of comparative advantage, the total output of goods is higher when each producer

Tom takes 20 minutes to cook an egg and 5 minutes to make a sandwich. Jerry takes 15 minutes to cook an egg and 3 minutes to make a sandwich. If Tom and Jerry trade

The kitchen manager at an Italian restaurant is deciding what assignments he should give to his two cooks, John and David. John can make 25 pizzas or 40 servings of pasta per hour and David can make 20 pizzas or 30 servings of pasta. Which of the following should be the manager's choice?

An economy produces only food and shelter. There are two individuals in the economy: Bill and Mary. Mary's opportunity cost of producing 1 unit of shelter is 2 units of food. Bill's opportunity cost of producing 1 unit of shelter is 4 units of food.