Question 1

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

Comparative advantage is determined by who has the lower opportunity cost in producing a good. Joe's opportunity cost of making a sandwich is 0.5 pizzas (10 pizzas / 20 sandwiches), while Beth's is 0.75 pizzas (27 pizzas / 36 sandwiches). Therefore, Joe has a comparative advantage in making sandwiches. For pizzas, Joe's opportunity cost is 2 sandwiches (20 sandwiches / 10 pizzas), while Beth's is 1.33 sandwiches (36 sandwiches / 27 pizzas), giving Beth the comparative advantage in pizza production.

Question 2

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 should specialize in the production of
A) shoes.
B) bookshelves.
C) either shoes or bookshelves.
D) neither shoes nor bookshelves.

Accepted Answer

Alice has a lower opportunity cost in producing bookshelves compared to shoes when compared to Roger. For Alice, the opportunity cost of producing one bookshelf is 1.25 pairs of shoes (5 pairs of shoes / 4 bookshelves), whereas for Roger, it is 1.67 pairs of shoes (10 pairs of shoes / 6 bookshelves). Therefore, Alice should specialize in producing bookshelves, where she has a comparative advantage.

Question 3

-Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. ________ has a comparative advantage in teapots and ________ has a comparative advantage in coffeepots.
A) Orange Rose; Blue Violet
B) Blue Violet; Orange Rose
C) Blue Violet; Blue Violet
D) Orange Rose; Orange Rose

Accepted Answer

Blue Violet has a comparative advantage in teapots because it sacrifices fewer coffeepots to produce one more teapot compared to Orange Rose. Orange Rose has a comparative advantage in coffeepots because it sacrifices fewer teapots to produce one more coffeepot compared to Blue Violet.

Question 4

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

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

Question 5

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.

Question 6

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is CORRECT?
A) Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit.
B) Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish.
C) Homer has a comparative advantage in both catching fish and picking fruit.
D) Teddy has a comparative advantage in both catching fish and picking fruit.

Accepted Answer

Homer's opportunity cost of catching one fish is 2/3 of a piece of fruit (100 fruits/150 fish), while Teddy's is 3 pieces of fruit (60 fruits/20 fish). Thus, Homer has a comparative advantage in catching fish because he gives up less fruit per fish caught. Conversely, Teddy's opportunity cost of picking one piece of fruit is 1/3 of a fish (20 fish/60 fruits), while Homer's is 1.5 fish (150 fish/100 fruits), making Teddy more efficient in fruit picking due to his lower opportunity cost.

Question 7

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

Jerry is more efficient at cooking eggs and making sandwiches than Tom, so he should trade sandwiches for eggs to maximize their combined productivity.

Question 8

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 comparative advantage in the production of wheat because it has a lower opportunity cost (4 tons of corn) compared to Country Beta (8 tons of corn).

Question 9

-Two countries, Blue Violet and Sweet Pansy, produce only two goods: teapots and coffeepots. The table above gives their production possibilities.
A) Blue Violet has a comparative advantage in teapots.
B) Sweet Pansy has a comparative advantage in teapots.
C) Both have a comparative advantage in teapots.
D) Sweet Pansy has an absolute advantage in teapots.

Accepted Answer

Blue Violet can produce more teapots than Sweet Pansy with the same resources.

Question 10

Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is ________ and she should specialize in the production of ________.
A) 8 fish per coconut; fish
B) 2 fish per coconut; coconuts
C) 6 fish per coconut; coconuts
D) 0 fish per coconut; coconuts

Accepted Answer

Ann's opportunity cost of producing 1 coconut is 2 fish (since she can produce 8 fish or 4 coconuts in a day, so for each coconut, she gives up 2 fish). Given her lower opportunity cost in producing coconuts compared to Betty, she should specialize in the production of coconuts.

Question 11

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

Andy has a lower opportunity cost for producing bread (1/3 pound of butter per loaf) compared to Bob (1 pound of butter per loaf), giving Andy a comparative advantage in bread. Bob has a lower opportunity cost for producing butter (1 loaf of bread per pound) compared to Andy (3 loaves of bread per pound), giving Bob a comparative advantage in butter.

Question 12

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 because he gives up fewer servings of pasta to make one pizza compared to John. For David, the opportunity cost of making 1 pizza is 1.5 servings of pasta (30 servings of pasta/20 pizzas), whereas for John, it is 1.6 servings of pasta (40 servings of pasta/25 pizzas).

Question 13

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 14

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 15

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 because she sacrifices fewer sandwiches to produce one pizza compared to Joe. For Beth, the opportunity cost of 1 pizza is 12/9 = 1.33 sandwiches, whereas for Joe, it's 10/5 = 2 sandwiches.

Question 16

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 is about the relative cost of producing goods. In choice A, it shows that Farmer John has a lower opportunity cost in producing wheat compared to Farmer Ben, which is the essence of comparative advantage.

Question 17

In an hour, Andy can make either 5 pizzas or 12 pies and Chris can make either 6 pizzas or 18 pies. ________ advantage in making pizzas.
A) Andy has an absolute
B) Andy has a comparative
C) Chris has a comparative
D) None of the above answers is correct.

Accepted Answer

The answer of In an hour, Andy can make either...

Question 18

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

Alice has a comparative advantage in producing bookshelves because she gives up fewer pairs of shoes per bookshelf compared to Roger.

Question 19

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 has a comparative advantage in making sandwiches because he takes less additional time to make a sandwich compared to cooking an egg than Jerry does (5 minutes vs. 3 minutes, but the difference in cooking an egg is greater). Jerry has a comparative advantage in cooking eggs because he takes less time to cook an egg compared to Tom. By specializing in their comparative advantages and trading, both can benefit from increased efficiency.

Question 20

Betty and Ann live on a desert island. With a day's labor, Ann can produce 6 fish or 4 coconuts; Betty can produce 3 fish or 1 coconut. Betty's opportunity cost of producing 1 fish is ________, and she should specialize in the production of ________.
A) 1/3 coconut per fish; fish
B) 2/3 coconut per fish; coconuts
C) 1 coconut per fish; fish
D) 4 coconuts per fish; fish

Accepted Answer

Betty's opportunity cost of producing 1 fish is 1/3 coconut (since she can produce 3 fish or 1 coconut, producing 1 fish means giving up 1/3 of a coconut). Given her lower opportunity cost for fish compared to Ann, she should specialize in the production of fish.

Quiz 2: The Economic Problem

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

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 should specialize in the production of

-Two countries, Blue Violet and Orange Rose, produce only two goods: teapots and coffeepots. The table above gives their production possibilities. has a comparative advantage in teapots and has a comparative advantage in coffeepots.

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 .

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.

Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is CORRECT?

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

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?

-Two countries, Blue Violet and Sweet Pansy, produce only two goods: teapots and coffeepots. The table above gives their production possibilities.

Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is and she should specialize in the production of .

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

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?

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?

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?

Which of the following describes comparative advantage?

In an hour, Andy can make either 5 pizzas or 12 pies and Chris can make either 6 pizzas or 18 pies. ________ advantage in making pizzas.

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 .

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

Betty and Ann live on a desert island. With a day's labor, Ann can produce 6 fish or 4 coconuts; Betty can produce 3 fish or 1 coconut. Betty's opportunity cost of producing 1 fish is , and she should specialize in the production of .