Question 1

If nation A has an absolute advantage over nation B in the production of a product, this implies that:

Accepted Answer

An absolute advantage means that a country can produce a product with fewer resources than another country. Therefore, choice A is correct. Choices B, C, D, and E do not necessarily follow from the concept of absolute advantage.

Question 2

If nation A has a comparative advantage over nation B in the production of a product, this implies:

Accepted Answer

Comparative advantage means that a country can produce a certain good at a lower opportunity cost than another country. This means that the cost of producing that good in terms of other goods that have to be given up is lower in country A compared to country B. Therefore, country A has a comparative advantage in producing that good.

Question 3

When Brazil can generate a product using fewer labor hours and resources than the United States, an economist would say that Brazil had:

Accepted Answer

The answer of When Brazil can generate a product using...

Question 4

If Japan gives up ten bushels of rice to produce one bicycle, while the United States gives up five bushels of rice to produce one bicycle, then:

Accepted Answer

The answer of If Japan gives up ten bushels of...

Question 5

The average National Basketball Association player is over 6 feet tall. The average horse jockey is shorter than 5 1/2 feet tall. This is because height provides NBA players with:

Accepted Answer

The answer of The average National Basketball Association player is...

Question 6

A lawyer once said, "I could paint my house and fix my plumbing if I just had some technical training and good tools. But, I would rather hire a painter and a plumber." When it comes to fixing a leaking sink, the plumber:

Accepted Answer

The plumber has a comparative advantage in fixing a leaking sink as it is their specialized skill and they can do it more efficiently and effectively than someone without that expertise. This is the reason why the lawyer would rather hire a plumber instead of trying to fix the sink themselves.

Question 7

If a country has a lower opportunity cost of producing oranges, then this is:

Accepted Answer

If a country has a lower opportunity cost of producing oranges, it means that they have a comparative advantage in producing oranges. This means that they can produce oranges at a lower opportunity cost compared to other goods they could produce. This implies that they should specialize in producing oranges and trade with other countries for goods which they have a higher opportunity cost of producing.

Question 8

Juanita, a lawyer, can type faster than Jill, her secretary. Jill, on the other hand, does not have the ability or skills to practice law. Applying the principles of international trade to this situation, an economic consultant advises Juanita to:

Accepted Answer

The principle of comparative advantage suggests that each individual should specialize in the activity in which they have the lowest opportunity cost. In this case, Juanita has a lower opportunity cost in practicing law, while Jill has a lower opportunity cost in typing. Therefore, it would be most efficient for Juanita to specialize in practicing law and leave the typing to Jill, rather than attempting to do both tasks herself or investing time and resources into having Jill attend law school.

Question 9

If a country has a comparative advantage in oil, then this means that the opportunity cost of producing oil is:

Accepted Answer

If a country has a comparative advantage in oil, then this means that they can produce oil at a lower opportunity cost than other goods. Therefore, the opportunity cost of producing oil is low.

Question 10

Suppose rice can be produced in country X at a lower cost than in country Y, while tuna can be produced in country Y at a lower cost than in country X. International competition will:

Accepted Answer

International competition will drive each country to specialize in producing the goods in which they have a comparative advantage (i.e. lower opportunity cost). In this case, country X will specialize in producing rice, while country Y will specialize in producing tuna. This will result in both countries being able to produce both goods at a lower cost than if they tried to produce both goods on their own. This is the basis of the principle of comparative advantage in international trade.

Question 11

Absolute advantage is the ability of a country to produce a good with ____ than another country.

Accepted Answer

The answer of Absolute advantage is the ability of a...

Question 12

A country is said to have an absolute advantage in the production of a good when:

Accepted Answer

Absolute advantage refers to a country's ability to produce a given good using fewer resources than another country. It does not necessarily imply specialization or lower opportunity cost. Therefore, option B is the best choice as it accurately defines absolute advantage.

Question 13

Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:

Accepted Answer

The increase in the price of doormats relative to hats suggests that there is now a higher demand for doormats than hats. This benefits Portugal, which has a comparative advantage in producing doormats, as more people are now willing to buy their doormats at the higher price. As a result, some of the gains from trade will shift to Portugal.

Question 14

If a country has a comparative advantage in the production of all goods, it should:

Accepted Answer

If a country has a comparative advantage in the production of all goods, it means that it can produce all goods at a lower opportunity cost than other countries. Therefore, the country should specialize in the production of goods with the lowest opportunity cost, as this will maximize its output and allow it to trade with other countries to acquire goods it cannot produce efficiently.

Question 15

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, then:

Accepted Answer

If the opportunity cost of producing cheese is higher in Greece than it is in Italy, it means that producing cheese in Greece comes at a higher cost in terms of giving up other goods and services that could have been produced using the same resources. Italy, on the other hand, has a lower opportunity cost of producing cheese, which means that it can produce cheese at a lower cost in terms of giving up other goods and services. Therefore, Italy should specialize in producing cheese while Greece should focus on producing other goods and services where it has a comparative advantage.

Question 16

A country that can produce a good using fewer resources than another country has a(n):

Accepted Answer

A country that can produce a good using fewer resources than another country has an absolute advantage in producing that good.

Question 17

If one country can produce a good with fewer resources than another country, this is called:

Accepted Answer

This is the definition of absolute advantage, which means that one country has a lower cost of production for a good than another country. It is different from comparative advantage, which is based on the opportunity cost of producing a good. Specialization and free trade are related concepts, but not the most precise answer to the question. Geographic advantage is not a commonly used term in economics.

Question 18

If Country A has an absolute advantage over Country B in the production of every commodity:

Accepted Answer

Even if Country A has an absolute advantage over Country B in the production of every commodity, mutual gains from trade are still possible. This is because each country can specialize in the production of the goods in which it has a comparative advantage and then trade with each other. By doing so, they can both enjoy increased consumption possibilities and a higher level of output than they would have had without trade.

Question 19

If India has an absolute advantage in rug production when compared to England, then:

Accepted Answer

The answer of If India has an absolute advantage in...

Question 20

If Dana can paint his house faster than Luke, a professional house painter, then:

Accepted Answer

The answer of If Dana can paint his house faster...

Quiz 21: International Trade and Finance