Question 1

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. If Germany produces one less computer and switches resources to cameras, and the United States produces one more computer and takes resources out of cameras, then the net change in camera production in both countries taken together is

Accepted Answer

Germany switching from producing 1 computer to cameras means it will produce 20 cameras instead (since 1 computer = 20 cameras for Germany). The United States producing one more computer means it will produce 10 fewer cameras (since 1 computer = 10 cameras for the US). The net change is 20 (from Germany) - 10 (from the US) = +10 cameras.

Question 2

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

Accepted Answer

Missouri has a comparative advantage in producing pecans because it can produce them at a lower opportunity cost compared to pears (1 ton of pecans costs 0.5 tons of pears in Missouri, whereas in Washington, 1 ton of pecans costs 4 tons of pears). Washington has a comparative advantage in producing pears due to its higher efficiency. Therefore, Missouri would specialize in pecan production and trade with Washington for pears.

Question 3

-In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?

Accepted Answer

When individuals or countries specialize in producing goods for which they have a comparative advantage, they can trade to achieve an outcome where both parties can consume beyond their initial production possibilities. Thus, if Joe specializes in producing the good for which he has a comparative advantage and Jill does the same, through trade, they can both end up consuming more than they initially could, which includes more than 2 shirts and 2 pairs of pants.

Question 4

When a nation has a comparative advantage in the production of a particular good

Accepted Answer

When a nation has a comparative advantage in the production of a particular good, it means it can produce that good at a lower opportunity cost compared to other nations. This encourages the nation to specialize in the production of that good and trade for other goods, leading to gains from trade.

Question 5

The idea of comparative advantage implies that people or countries

Accepted Answer

The idea of comparative advantage suggests that by specializing in the production of goods for which they have a comparative advantage and then trading, individuals or countries can benefit from trade, allowing them to consume beyond their own production possibilities frontier.

Question 6

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements is TRUE?

Accepted Answer

Washington can produce more of both pecans and pears than Missouri, indicating an absolute advantage in both. Comparative advantage involves producing at a lower opportunity cost, not just producing more.

Question 7

By specialization and trade, two individuals can

Accepted Answer

Specialization and trade allow individuals to consume at a point beyond their individual production possibilities frontiers because they can focus on producing goods for which they have a comparative advantage and trade for other goods, effectively consuming more than they could produce on their own.

Question 8

To obtain the gains available from comparative advantage, individuals or countries must do more than specialize; they must also

Accepted Answer

To obtain the gains available from comparative advantage, individuals or countries must specialize in the production of goods and services in which they have a comparative advantage and then trade these goods and services with others. This exchange allows all parties to benefit from specialization.

Question 9

George and Michael can gain from exchange

Accepted Answer

George and Michael can gain from exchange if each specializes in the production of the good for which he has the lower opportunity cost. This allows each to produce what they are relatively more efficient at, leading to overall higher productivity and potential for beneficial trade.

Question 10

A country that has a comparative advantage in producing capital goods will ________ a country that has a comparative advantage in consumption goods.

Accepted Answer

Countries tend to specialize in the production of goods for which they have a comparative advantage and then trade these goods with other countries. Thus, a country with a comparative advantage in producing capital goods will specialize in that area and trade with countries that have a comparative advantage in consumption goods.

Question 11

Tom and Di grow tomatoes and turnips. Tom has a comparative advantage in growing tomatoes if

Accepted Answer

Comparative advantage is determined by who has the lower opportunity cost in producing a good. If Tom's opportunity cost of producing tomatoes is less than Di's, Tom has a comparative advantage in growing tomatoes.

Question 12

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or 1 computer in an hour. The opportunity cost of 20 cameras in terms of computers in Germany is

Accepted Answer

The opportunity cost of producing 20 cameras in Germany is 1 computer, meaning for every 20 cameras produced, Germany sacrifices the production of 1 computer. Therefore, the opportunity cost of 20 cameras in terms of computers in Germany is 1 computer per 20 cameras, or equivalently, 1 computer per camera when considering the ratio for a single camera.

Question 13

If Tom and Di specialize in producing the goods in which he and she have a comparative advantage and they exchange goods, then

Accepted Answer

Specializing in the production of goods in which they have a comparative advantage and then exchanging those goods allows both parties to consume a combination of goods that they would not be able to produce on their own, effectively moving their consumption possibilities outside their individual production possibility frontiers.

Question 14

One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has

Accepted Answer

The United States having one of the largest categories of exports in pop culture suggests it has a comparative advantage, meaning it can produce these goods more efficiently relative to other goods compared to other countries.

Question 15

Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, ________ will gain from that trade because ________.

Accepted Answer

When countries specialize in goods in which they have a comparative advantage and then trade, both countries can consume beyond their production possibilities frontiers (PPFs), leading to gains for both.

Question 16

One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has

Accepted Answer

A lower opportunity cost of producing pop culture implies that the United States can produce pop culture more efficiently relative to other goods or services, which supports its large export volume in this category.

Question 17

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the ________ and Fred changes the ________.

Accepted Answer

The answer of In one day, Sue can change the...

Question 18

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. The opportunity cost of 20 cameras in terms of computers in the United States is

Accepted Answer

The answer of Suppose that a typical German factory can...

Question 19

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements about opportunity cost is CORRECT?

Accepted Answer

The opportunity cost of producing one good is the amount of the other good that must be given up. For Missouri, producing 1 ton of pecans means giving up 1/2 ton of pears (5,000 tons of pears / 10,000 tons of pecans), and producing 1 ton of pears means giving up 2 tons of pecans (10,000 tons of pecans / 5,000 tons of pears). For Washington, producing 1 ton of pecans means giving up 4 tons of pears (48,000 tons of pears / 12,000 tons of pecans), and producing 1 ton of pears means giving up 1/4 ton of pecans (12,000 tons of pecans / 48,000 tons of pears). Thus, both B and C correctly describe the opportunity costs for Missouri and Washington.

Question 20

According to the principle of comparative advantage, if a rich country trades with a poor country, then

Accepted Answer

The principle of comparative advantage suggests that when countries engage in trade, each can specialize in producing goods for which they have a lower opportunity cost, leading to mutual benefits for both trading partners, regardless of their initial economic status.

Quiz 2: The Economic Problem

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. If these two states were to engage in trade, which of the following is TRUE?

-In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?

When a nation has a comparative advantage in the production of a particular good

The idea of comparative advantage implies that people or countries

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements is TRUE?

By specialization and trade, two individuals can

To obtain the gains available from comparative advantage, individuals or countries must do more than specialize; they must also

George and Michael can gain from exchange

A country that has a comparative advantage in producing capital goods will ________ a country that has a comparative advantage in consumption goods.

Tom and Di grow tomatoes and turnips. Tom has a comparative advantage in growing tomatoes if

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or 1 computer in an hour. The opportunity cost of 20 cameras in terms of computers in Germany is

If Tom and Di specialize in producing the goods in which he and she have a comparative advantage and they exchange goods, then

One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has

Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, will gain from that trade because .

One of the largest categories of exports from the United States is now pop culture: movies, music, TV programming, and videos. A direct conclusion from this information is that, compared to other countries, the United States has

In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue and Fred can gain from trade if Sue changes the and Fred changes the .

Suppose that a typical German factory can produce 20 cameras or 1 computer in an hour, and that a typical American factory can produce 10 cameras or one computer in an hour. The opportunity cost of 20 cameras in terms of computers in the United States is

Missouri can produce 10,000 tons of pecans per year or 5,000 tons of pears per year. Washington can produce 12,000 tons of pecans per year or 48,000 tons of pears per year. Which of the following statements about opportunity cost is CORRECT?

According to the principle of comparative advantage, if a rich country trades with a poor country, then