Question 1

Fourteenth-century potters in the Chinese city of Jingdezhen developed the technology to heat a kiln at 1,300 degrees Celsius and produce porcelain, or "china," which was particularly popular in Persia where the Koran forbade serving food on gold or silver and wealthy families were anxious for a legal way to impress their dinner guests. The potters also imported Persian cobalt to create the blue dye for the porcelain (local cobalt was not as bold in color). Which advantage(s) from trade is(are) illustrated in this passage?
A) differences in preferences
B) specialization
C) comparative advantage
D) The passage illustrates all of these advantages.

Accepted Answer

The passage illustrates all three advantages of trade. Differences in preferences are demonstrated by the fact that Persians preferred porcelain over gold or silver for serving food. Specialization is demonstrated by the fact that the potters in Jingdezhen developed the technology to produce porcelain, which became their specialty. Finally, the use of imported cobalt from Persia illustrates comparative advantage, as the local cobalt did not produce the desired color.

Question 2

Absolute advantage derives from which of the following?
A) the lowest cost of production
B) the most suitable climate
C) the least expensive labor force
D) the best educated labor force

Accepted Answer

Absolute advantage refers to a country's ability to produce a particular good or service at a lower cost per unit than any other country. Therefore, the country with the lowest cost of production for a specific product will have an absolute advantage in producing that product.

Question 3

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?
A) The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.
B) The opportunity cost of painting a house is lower for Alex Rodriguez than for the high school student.
C) The opportunity cost of painting a house is the same for Alex Rodriguez as for the high school student.
D) The opportunity cost of painting a house is zero for Alex Rodriguez and is negative for the high school student.

Accepted Answer

The opportunity cost of painting a house for Alex Rodriguez is higher because he could potentially earn more money by spending his time on activities related to baseball or business ventures. The high school student likely does not have as many profitable opportunities available, so the opportunity cost of painting a house is lower for them.

Question 4

The relationship between trade and specialization is best characterized as follows:
A) Trade decreases specialization, which in turn increases the demand for trade.
B) Trade decreases specialization, which in turn decreases the demand for trade.
C) Trade increases specialization, which in turn increases the demand for trade.
D) Trade increases specialization, which in turn decreases the demand for trade.

Accepted Answer

Trade allows countries to specialize in the production of the goods and services that they have a comparative advantage in, which leads to increased efficiency and higher levels of productivity. As countries become more specialized in certain industries, they become more reliant on trade to obtain the goods and services they do not produce efficiently themselves. Thus, trade and specialization create a positive feedback loop where each reinforces the other, resulting in an increased demand for trade.

Question 5

Which of the following best describes the principle of comparative advantage?
A) Some people can produce the same good better than other producers can.
B) Someone has the ability to produce the same good using fewer inputs than another producer.
C) Someone has the ability to produce the same good for the lowest opportunity cost.
D) To produce more of one good, people have to produce less of another good.

Accepted Answer

The principle of comparative advantage is based on the idea that a country or individual should produce and trade the goods in which they have the lowest opportunity cost. This means that they give up less of other goods in order to produce one specific good, making it more efficient for them to focus on that good and trade for others. Option A is partially correct but does not fully capture the idea of comparative advantage. Option B is related to the concept of absolute advantage, not comparative advantage. Option D describes the concept of trade-offs, but not comparative advantage specifically.

Question 6

Economies can grow due to:
A) the extent to which all individuals are educated in all areas of production.
B) government policies.
C) the extent to which markets facilitate specialization through trade.
D) barriers to trade that promote the growth of domestic markets.

Accepted Answer

Markets facilitate specialization through trade by allowing countries to produce and export goods that they have a comparative advantage in. This specialization can lead to increased productivity, efficiency, and overall economic growth.

Question 7

Which of the following statements is TRUE?
I. Compared with a modern economy, the division of knowledge is greater in a primitive economy because every family is self-sufficient: growing their own food, making their own clothes, and constructing their own shelter.
II. Nobody understands the entire process of producing even the simplest products, like a lead pencil, in a modern economy.
III. The collapse of communism and the opening of the Chinese economy to the rest of the world have increased the division of knowledge, leading to increased world output.
A) I only
B) III only
C) II and III only
D) I, II, and III

Accepted Answer

The answer of Which of the following statements is TRUE?
I....

Question 8

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?
A) One prefers to hunt while the other prefers to paddle the boat; this is an example of diverse preferences.
B) One learns to be very good at paddling and one learns to be very good at hunting; this is an example of specialization and division of knowledge.
C) The paddler is stronger than the hunter so the paddler sacrifices a lot by hunting; this is an example of comparative advantage.
D) There is no trade in this example since no goods are being exchanged.

Accepted Answer

The rock carving depicting two people doing different jobs in the same boat is an early example of specialization and division of knowledge. One person focuses on hunting while the other focuses on paddling. By specializing in their specific tasks, both individuals become very skilled and efficient at what they do, improving overall productivity. This early example illustrates how trade can benefit societies by allowing individuals to specialize and exchange goods and services for mutual gain.

Question 9

Without trade, the knowledge used by an entire economy would be about the same as the knowledge had by:
A) all intelligent people combined.
B) a large number of people.
C) one person.
D) no one.

Accepted Answer

Without trade, an economy would be limited to the knowledge possessed by only one person. This is because trade allows for the sharing of knowledge between different individuals and cultures, leading to advancements and innovations that could not be achieved by a single person or group.

Question 10

Which of the following is typically a result of the division of knowledge?
A) The society runs with the knowledge of a few persons.
B) Each person has the same knowledge as everyone else.
C) Labor productivity is higher..
D) No one specializes in any activity.

Accepted Answer

Division of knowledge allows each person to specialize in a certain area of expertise, which leads to higher productivity as people can focus on what they are best at. This can also lead to advancements in technology and innovation as people build upon the knowledge of others. A society where only a few people possess knowledge would not be efficient or sustainable, and a society where everyone has the same knowledge would not allow for specialization or progress.

Question 11

Utilizing comparative advantage can best be exemplified as:
A) your lawyer word-processing her own legal briefs.
B) the CEO of Microsoft programming his own computer.
C) the president of your university teaching a class again.
D) a world-renowned chef hiring someone to cook meals for his family.

Accepted Answer

Utilizing comparative advantage involves specializing in a specific skill or task in which one has an advantage over others, and then trading with others who specialize in different skills or tasks. In this case, the world-renowned chef is utilizing his comparative advantage in cooking for others by hiring someone to cook meals for his family, allowing him to focus on his professional culinary work.

Question 12

Which of the following best explains the term "specialization" with respect to trade?
A) Specialization occurs when a people concentrate their productive resources on the goods and services they can produce most efficiently.
B) Specialization occurs when one person can produce more of a particular good than another person.
C) Specialization refers to the absolute advantage that a person enjoys in the production of goods and services.
D) Specialization refers to the ability of a person to produce more of a good than his or her trading partners.

Accepted Answer

Specialization is the concentration on producing goods or services in which a country, individual, or firm has a comparative advantage. It is the ability to produce a good or service at a lower opportunity cost compared to others. Therefore, it occurs when people concentrate their productive resources on the goods and services they can produce most efficiently.

Question 13

Why do people specialize?
A) Specialization increases productivity.
B) Specialization decreases people's dependence on one another.
C) People become self-sufficient when they specialize.
D) Most people only know how to do a few tasks.

Accepted Answer

Specialization allows individuals to focus on tasks that they are skilled at, which increases their efficiency and productivity in those tasks. This leads to an overall increase in productivity for the individual and the organization they work for.

Question 14

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?
A) Owen Wilson has fully specialized in action comedy movies while Tom Cruise has fully specialized in serious action movies.
B) Due to filmography protectionism, Owen Wilson is unable to secure serious action roles, and Tom Cruise is unable to secure action comedy roles.
C) Casting directors see Owen Wilson as relatively better at action comedy roles and Tom Cruise as relatively better at serious action roles and cast them accordingly.
D) Owen Wilson does not have the talent necessary to act in more serious films.

Accepted Answer

The theory of specialization can be applied to Owen Wilson and Tom Cruise in terms of their perceived strengths in certain types of roles. Casting directors may view Owen Wilson as better suited for action comedy roles and Tom Cruise as better suited for serious action roles, and cast them accordingly. This does not necessarily mean that they are unable to perform well in other types of roles or that they have fully specialized in one type of role.

Question 15

Trade barriers like the Berlin Wall:
A) increased the number of scientists and engineers.
B) added billions of minds to the global division of knowledge.
C) decreased innovation and global cooperation.
D) prevented restrictive monopolistic practices.

Accepted Answer

Trade barriers like the Berlin Wall decreased innovation and global cooperation. They hindered the flow of information, resources, and ideas that could have led to more innovation and collaboration.

Question 16

The ability of one producer to produce one good or service using fewer inputs than another producer is:
A) comparative advantage.
B) absolute advantage.
C) opportunity cost.
D) competition.

Accepted Answer

Absolute advantage refers to the ability of a producer to produce a good or service using fewer inputs than another producer. Comparative advantage refers to the ability of a producer to produce a good or service at a lower opportunity cost than another producer. Opportunity cost refers to the cost of one good or service in terms of an alternative good or service that must be given up in order to produce it. Competition refers to the rivalry among producers to sell their products to buyers. Therefore, the correct answer is B.

Question 17

The enormous variety of goods and services that we consume each day can be attributed mainly to:
A) government regulations.
B) home production.
C) specialization and trade.
D) early craftsmen handing down their knowledge.

Accepted Answer

Specialization and trade allow individuals and businesses to focus on producing certain goods and services more efficiently, which leads to a greater variety of products available in the market. This is a result of comparative advantage and the division of labor, which have been key drivers of economic growth and innovation over time. Government regulations and home production may also have some impact on the variety of goods and services consumed, but they are not as significant as specialization and trade. Craftsmen handing down their knowledge may have played a role in the past, but this factor alone cannot explain the vast array of products available in the modern economy.

Question 18

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?
A) Jesse and Addae should tutor Jordan in both math and social skills.
B) Jesse should teach math and Addae should teach how to make friends.
C) Jesse and Addae should both teach how to make friends.
D) Jesse should teach how to make friends and Addae should teach math.

Accepted Answer

The answer of Jesse is good at math and excellent...

Question 19

As trade becomes more widespread, specialization ______, which in turn ______ productivity.
A) decreases; decreases
B) increases; increases
C) decreases; increases
D) increases; decreases

Accepted Answer

As trade allows for specialization, individuals and firms can focus on producing goods and services that they are most efficient at producing. This leads to an increase in productivity as resources are allocated more efficiently.

Question 20

If the goal of education were solely to support economic growth, the ideal graduate would be a:
A) jack-of-all-trades but master of none (where a "jack" is a serviceable tradesperson).
B) jack-of-one-trade and master of one.
C) jack-of-no-trades and master of none.
D) jack-of-some-trades but master of none.

Accepted Answer

If the goal of education were solely to support economic growth, the ideal graduate would be a jack-of-one-trade and master of one. This is because specialization and expertise in one specific area often leads to higher productivity and efficiency, which are important for economic growth. Being a jack-of-all-trades but master of none (A) may lead to versatility, but not necessarily higher productivity. Being a jack-of-no-trades and master of none (C) is not useful for economic growth, as it suggests a lack of skills and knowledge. Being a jack-of-some-trades but master of none (D) may indicate versatility, but without mastery in any one area, productivity may still be limited.

Quiz 2: The Power of Trade and Comparative

Absolute advantage derives from which of the following?

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?

The relationship between trade and specialization is best characterized as follows:

Which of the following best describes the principle of comparative advantage?

Economies can grow due to:

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?

Without trade, the knowledge used by an entire economy would be about the same as the knowledge had by:

Which of the following is typically a result of the division of knowledge?

Utilizing comparative advantage can best be exemplified as:

Which of the following best explains the term "specialization" with respect to trade?

Why do people specialize?

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?

Trade barriers like the Berlin Wall:

The ability of one producer to produce one good or service using fewer inputs than another producer is:

The enormous variety of goods and services that we consume each day can be attributed mainly to:

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?

As trade becomes more widespread, specialization , which in turn productivity.

If the goal of education were solely to support economic growth, the ideal graduate would be a: