Question 1

Public property rights refer to the right of ownership that is absolutely necessary for trade to occur and are ensured by a legal system of laws and courts.

Accepted Answer

Public property refers to property owned collectively by a community, government, or organization. In contrast, public property rights are not necessary for trade to occur and do not refer to ownership, but rather refer to government regulations and laws regarding the use, access, and protection of public property or resources. Private property rights are what enable trade to occur, as they provide individuals and businesses with the incentive and legal framework to own and exchange goods and services.

Question 2

Julio makes wine and beer.Last year he made 20 bottles of wine and 20 cases of beer.If the price of grapes goes down (making wine cheaper to make),Julio will be able to make the same amount of wine and more beer.

Accepted Answer

If the price of grapes goes down, Julio can make wine at a lower cost and use the savings to make more beer while still making the same amount of wine.

Question 3

Free trade leads to an overall improvement in the standard of living in a country because everything is produced at the lowest possible cost.

Accepted Answer

Free trade allows countries to specialize in producing goods and services that they are most efficient at, and import goods that are cheaper to produce in other countries. This leads to greater efficiency, economies of scale, competition, and lower prices for consumers, which ultimately improves the standard of living. However, free trade can also lead to job displacement and other negative effects in the short term.

Question 4

The reason why South Korea flourished economically relative to North Korea was that the former retained a strong version of communism and totalitarianism post World War II.

Accepted Answer

The statement is false. South Korea adopted a capitalist system and democracy, while North Korea maintained a communist government with a strong emphasis on totalitarianism.

Question 5

It has been generally observed that most trade in the world occurs between a developed and a less-developed nation rather than between industrial or developed nations.

Accepted Answer

The statement is false. According to data from the World Trade Organization, a significant amount of trade occurs between industrialized nations. For example, in 2019, the top five exporters were China, the United States, Germany, Japan, and the Netherlands – all of which are considered industrialized nations. Developed nations also tend to trade more with each other due to similar levels of economic development and consumer preferences.

Question 6

Gains from trade can be realized if each country specializes in its comparative advantage good.

Accepted Answer

When each country specializes in producing the good or service in which it has a comparative advantage, trade between the countries can lead to gains in overall production, consumption, and economic welfare. This is known as the principle of comparative advantage, which suggests that countries can benefit from trading with each other as long as they specialize in producing the goods or services for which they have the lowest opportunity cost.

Question 7

Increasing marginal opportunity costs indicate that if a nation wants to produce more of one product,it may do so by giving up greater and greater amounts of another product.

Accepted Answer

Increasing marginal opportunity costs mean that to produce additional units of one product, a nation must forego producing more and more units of another product. This means that the opportunity cost of producing one additional unit of the product increases as more units of that product are produced.

Question 8

Individuals,firms,and nations should specialize in those activities which have the highest marginal cost.

Accepted Answer

This statement is incorrect. The correct statement is that individuals, firms, and nations should specialize in those activities which have the lowest marginal cost. This is because specializing in activities with a low marginal cost will lead to a more efficient use of resources and increased productivity.

Question 9

The marginal cost of producing a commodity increases because of specialization.

Accepted Answer

The marginal cost of producing a commodity increases because of specialization because as a producer specializes in producing a particular commodity, they become more efficient at producing that commodity. This increased efficiency leads to a decrease in the average cost of producing the commodity, but an increase in the marginal cost of producing the commodity.

Question 10

If using the same resources,the U.S.workers can produce more of any good than Mexican workers,then the United States should produce every good.

Accepted Answer

The principle of comparative advantage suggests that even if one country has an absolute advantage in producing all goods, it still makes sense for each country to specialize in the production of the goods where it has a comparative advantage (i.e., where it can produce at a lower opportunity cost). This leads to greater efficiency and increased overall production for both countries in the long run. Therefore, the United States should not produce every good, but rather focus on producing the goods where it has a comparative advantage.

Question 11

One of the reasons for China's real per capita GDP being far lower than that of Taiwan in 2000 was the lack of private property rights in the former nation.

Accepted Answer

Private property rights are a fundamental component of a market economy and a key factor determining economic growth. Without well-defined and enforceable property rights, individuals and businesses may be hesitant to make long-term investments and engage in productive activities, resulting in low levels of economic output. In 2000, Taiwan had a well-developed system of private property rights, which helped to foster economic growth and increase its real per capita GDP significantly higher than that of China. In contrast, China's property rights system was less developed at the time and imposed numerous restrictions on property ownership and usage, which hindered economic development.

Question 12

If an individual can produce a good or service with a lower opportunity cost than another individual,then he or she is said to have the comparative advantage.

Accepted Answer

This is the definition of comparative advantage in economics.

Question 13

Specialization according to comparative advantage followed by free trade makes every economy better off.

Accepted Answer

Specialization according to comparative advantage allows countries to produce the goods and services they are most efficient at, resulting in lower costs and increased productivity. Free trade then allows countries to trade these goods and services with other countries, leading to increased access to a wider variety of goods and services at lower prices. This ultimately leads to increased economic growth and improved living standards for all countries involved.

Question 14

Specialization and trade do not allow individuals,firms,or even nations to acquire goods that lie beyond their production capabilities.

Accepted Answer

Specialization and trade allow individuals, firms, and nations to acquire goods that lie beyond their production capabilities by trading with other individuals, firms, and nations that have a comparative advantage in producing those goods. This is the basic principle of international trade, which has allowed countries to specialize in producing certain goods and services and exchange them with other countries for goods and services that they cannot produce efficiently.

Question 15

Specialization and trade can take place only if a country is endowed with more of something compared to other countries.

Accepted Answer

Specialization and trade can take place even if a country is not necessarily endowed with more of something compared to other countries. It can also take place if a country has a comparative advantage in producing a particular good or service. This means that even if a country can produce a good or service more efficiently or at a lower cost compared to other countries, it can specialize in producing that good or service and trade it with other countries.

Quiz 2: Choice, opportunity Costs, and Specialization