Question 1

If Spain is capable of producing tapas, soccer balls, or some combination of those two, then it should:

Accepted Answer

Spain should produce the good(s) it has a comparative advantage in, which means the good(s) it can produce at a lower opportunity cost compared to other countries. This will lead to increased efficiency and productivity, ultimately benefiting both Spain and its trading partners.

Question 2

A country's newest ruler has decided the country will become self-sufficient and ceases trade with the rest of the world. How will this most likely affect the country's citizens?

Accepted Answer

By ceasing trade with the rest of the world, the country will have to rely solely on itself for the goods it needs. This means that it will not be able to access goods that other countries have a comparative advantage in producing, and its citizens will be forced to consume less of those goods or pay higher prices for them if they are produced domestically. This may lead to a decrease in their overall standard of living.

Question 3

Suppose that a worker in Country A can make either 10 iPhones or 5 iPads each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPhones or 10 iPads each year. Country B has 200 workers. Country B has a(n)_____ advantage at producing iPads, which means it should specialize in _____.

Accepted Answer

Country B has a comparative advantage in producing iPads because each worker can produce more iPads than iPhones compared to Country A. Therefore, Country B should specialize in producing iPads and trade with Country A, which should specialize in producing iPhones.

Question 4

People will choose to specialize and trade if they can acquire the goods they want:

Accepted Answer

The principle behind specialization and trade is that individuals or countries can produce certain goods or services more efficiently than others. By focusing on producing these goods or services and trading with others who specialize in different areas, both parties can benefit from lower costs and a greater variety of goods. Therefore, people will choose to specialize and trade if they can acquire the goods they want at a lower cost than making the goods themselves.

Question 5

Suppose that a worker in Country A can produce either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can produce either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Country B will benefit from trade if the country specializes in _____ because _____

Accepted Answer

Country B has a lower opportunity cost of producing tomatoes than Country A, as it can produce them with fewer resources compared to bananas. Therefore, by specializing in tomatoes, Country B can trade with Country A for bananas and both countries can benefit from trade.

Question 6

Suppose the figure shown represents the production possibilities frontier for Country A. Country B offers to trade four trucks for every airplane. Assuming Country A specializes in airplane production, which of the following combinations of goods could Country A consume?

Accepted Answer

The answer of  Suppose the figure shown represents the...

Question 7

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Which of the following statements is true regarding Country A's opportunity cost of a t-shirt?

Accepted Answer

The answer of  Refer to the figure shown, which...

Question 8

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering the production possibilities frontiers of both countries, we know that both would be willing to agree to which terms of trade?

Accepted Answer

The answer of  Refer to the figure shown, which...

Question 9

Tom and Jerry have one day to work, but two tasks to focus on: building chairs and tables. If Tom spends all day building chairs, he will make 16 chairs. If he instead devotes his day to building tables, Tom will make 4 tables. If Jerry spends his day building chairs, he will make 14 chairs; if he spends the day building tables, he will make 7 tables. The opportunity cost of building one table is _____ for Tom and _____ for Jerry. Therefore, Tom should specialize in _____.

Accepted Answer

The opportunity cost of producing one table is the production of chairs that would need to be sacrificed to produce that table.

For Tom, the opportunity cost of one table is 16 chairs (the number of chairs he could have built if he devoted his whole day to chair-building) divided by 4 tables (the number of tables he could have built if he devoted his whole day to table-building):

16 chairs / 4 tables = 4 chairs per table

For Jerry, the opportunity cost of one table is 14 chairs (the number of chairs he could have built if he devoted his whole day to chair-building) divided by 7 tables (the number of tables he could have built if he devoted his whole day to table-building):

14 chairs / 7 tables = 2 chairs per table

Therefore, Tom should specialize in building tables (since his opportunity cost per table is lower than Jerry's), while Jerry should specialize in building chairs.

Question 10

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering the production possibilities frontiers of both countries, we can conclude that Country B will specialize in _____ and be willing to _____ three cars for each truck.

Accepted Answer

The answer of  Refer to the figure shown, which...

Question 11

Suppose that a worker in Country A can produce either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can produce either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The workers in Country A should specialize in producing _____ because it has a(n)_____ at producing that good.

Accepted Answer

The workers in Country A should specialize in producing bananas because they have a comparative advantage in producing bananas, as they can produce 5 times more bananas than tomatoes, while the workers in Country B have a smaller difference in their production capabilities.

Question 12

Why do people often choose to specialize and trade?

Accepted Answer

By specializing in a certain skill or trade, individuals can produce more efficiently and at a lower cost, allowing them to generate more income. With that income, they can then purchase goods and services from others who specialize in different areas, resulting in a higher overall level of consumption and well-being than if they attempted to produce everything they needed on their own.

Question 13

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After comparing each country's production possibilities frontier, it is clear that:

Accepted Answer

The answer of  Refer to the figure shown, which...

Question 14

When a country loses its comparative advantage at producing a good it will:

Accepted Answer

When a country loses its comparative advantage at producing a good, it will still have an absolute advantage but it will not be able to compete with other countries in international trade. However, the country can gain a comparative advantage at producing another good and shift its production towards that good. This way, the country can still participate in international trade and benefit from it.

Question 15

Economic theory states that losing a comparative advantage at producing one good means creating a comparative advantage at producing another. As an economy transitions from producing one good to producing another good:

Accepted Answer

The theory acknowledges that the transition can be difficult for those who must switch from producing one good to producing another. Therefore, choice A is the best option. Choices B and D are incorrect as the theory does not suggest that the transition is always a success or that people may not like it in the long run. Choice C is incorrect as outsourcing is not always beneficial for every member of society.

Question 16

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After examining each country's production possibilities frontier, it is clear that:

Accepted Answer

The answer of  Refer to the figure shown, which...

Question 17

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering the production possibilities frontiers of both countries, we can infer that Country A should specialize in producing _____ and be willing to _____ five cars for each truck.

Accepted Answer

The answer of  Refer to the figure shown, which...

Question 18

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After examining the production possibilities of each country, what can we surmise about the opportunity cost of a car for Country A?

Accepted Answer

The answer of  Refer to the figure shown, which...

Question 19

Two countries will choose to specialize and trade only if:

Accepted Answer

If the terms of trade fall between the two nations' opportunity costs for producing the goods on their own, both countries stand to benefit from specializing in producing the good in which they have a comparative advantage and trading for the other good. This allows both countries to consume more of both goods than they would be able to produce on their own. Option B is incorrect because the opportunity costs do not need to be the same; it is the comparative advantage that matters. Option C is incorrect because high opportunity costs may make trade even more beneficial, as it allows countries to make up for their production deficiencies. Option D is incorrect because the country with absolute advantage will always be better off producing both goods on their own, and the concept of comparative advantage implies that each country will specialize in the good in which it has a lower opportunity cost.

Question 20

If France is capable of producing cheese, wine, or some combination of those two, it should:

Accepted Answer

France should produce the good for which it has a comparative advantage. This means producing the good in which it has a lower opportunity cost compared to other countries. In this case, France is often known for producing high-quality cheese and wine due to its climate and geography. By specializing in these goods, France can produce them more efficiently and at a lower cost, thus increasing its overall economic welfare.

Quiz 2: Specialization and Exchange

If Spain is capable of producing tapas, soccer balls, or some combination of those two, then it should:

A country's newest ruler has decided the country will become self-sufficient and ceases trade with the rest of the world. How will this most likely affect the country's citizens?

People will choose to specialize and trade if they can acquire the goods they want:

Suppose the figure shown represents the production possibilities frontier for Country A. Country B offers to trade four trucks for every airplane. Assuming Country A specializes in airplane production, which of the following combinations of goods could Country A consume?

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Which of the following statements is true regarding Country A's opportunity cost of a t-shirt?

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering the production possibilities frontiers of both countries, we know that both would be willing to agree to which terms of trade?

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering the production possibilities frontiers of both countries, we can conclude that Country B will specialize in _ and be willing to _ three cars for each truck.

Why do people often choose to specialize and trade?

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After comparing each country's production possibilities frontier, it is clear that:

When a country loses its comparative advantage at producing a good it will:

Economic theory states that losing a comparative advantage at producing one good means creating a comparative advantage at producing another. As an economy transitions from producing one good to producing another good:

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After examining each country's production possibilities frontier, it is clear that:

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Considering the production possibilities frontiers of both countries, we can infer that Country A should specialize in producing _ and be willing to _ five cars for each truck.

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After examining the production possibilities of each country, what can we surmise about the opportunity cost of a car for Country A?

Two countries will choose to specialize and trade only if:

If France is capable of producing cheese, wine, or some combination of those two, it should: