Question 1

The ability of one producer to produce one good or service using fewer inputs than another producer is:
A) comparative advantage.
B) absolute advantage.
C) opportunity cost.
D) competition.

Accepted Answer

Absolute advantage refers to the ability of a producer to produce using fewer inputs than another producer. Comparative advantage, on the other hand, refers to the ability of a producer to produce a good or service at a lower opportunity cost than another producer. Opportunity cost is the cost of giving up one good or service in order to produce another, and competition is the rivalry between producers in a market.

Question 2

Which of the following is typically a result of the division of knowledge?
A) The society runs with the knowledge of a few persons.
B) Each person has the same knowledge as everyone else.
C) Labor productivity is higher..
D) No one specializes in any activity.

Accepted Answer

Division of knowledge leads to specialization in different areas, which results in higher labor productivity as each individual can focus on their area of expertise.

Question 3

Which of the following best describes the principle of comparative advantage?
A) Some people can produce the same good better than other producers can.
B) Someone has the ability to produce the same good using fewer inputs than another producer.
C) Someone has the ability to produce the same good for the lowest opportunity cost.
D) To produce more of one good, people have to produce less of another good.

Accepted Answer

The principle of comparative advantage states that a person or country should specialize in producing the good or service for which they have the lowest opportunity cost, meaning they can produce it at the lowest cost compared to others. This allows for mutually beneficial trade between individuals or countries who each have a comparative advantage in producing different goods or services. Choice A refers to absolute advantage, while choice B is the concept of efficiency. Choice D refers to the concept of trade-offs.

Question 4

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?
A) One prefers to hunt while the other prefers to paddle the boat; this is an example of diverse preferences.
B) One learns to be very good at paddling and one learns to be very good at hunting; this is an example of specialization and division of knowledge.
C) The paddler is stronger than the hunter so the paddler sacrifices a lot by hunting; this is an example of comparative advantage.
D) There is no trade in this example since no goods are being exchanged.

Accepted Answer

The rock carving illustrates the benefits of trade through specialization and division of knowledge. One person becomes an expert at hunting while the other becomes an expert at paddling. They are able to work together efficiently and effectively, allowing them to achieve more than they could individually. This is the foundation of trade - individuals specializing their skills and expertise and trading with others who have specialized in different areas to increase overall productivity and wealth.

Question 5

Economies can grow due to:
A) the extent to which all individuals are educated in all areas of production.
B) government policies.
C) the extent to which markets facilitate specialization through trade.
D) barriers to trade that promote the growth of domestic markets.

Accepted Answer

Markets that facilitate specialization through trade allow countries to produce goods and services more efficiently, leading to economic growth. Specialization allows countries to focus on their comparative advantage, leading to increased productivity and output. As a result, the economy grows as more goods and services are produced, leading to an increase in income and living standards. In contrast, barriers to trade can limit the ability of countries to specialize and can lead to inefficiencies, reducing the potential for economic growth.

Question 6

Which of the following statements is TRUE?
I. Compared with a modern economy, the division of knowledge is greater in a primitive economy because every family is self-sufficient: growing their own food, making their own clothes, and constructing their own shelter.
II. Nobody understands the entire process of producing even the simplest products, like a lead pencil, in a modern economy.
III. The collapse of communism and the opening of the Chinese economy to the rest of the world have increased the division of knowledge, leading to increased world output.
A) I only
B) III only
C) II and III only
D) I, II, and III

Accepted Answer

In a modern economy, the division of knowledge is greater because tasks are specialized, unlike in a primitive economy where families are self-sufficient. No single person understands the entire production process of even simple products due to this specialization. The opening of economies like China's has increased the division of knowledge and world output.

Question 7

The enormous variety of goods and services that we consume each day can be attributed mainly to:
A) government regulations.
B) home production.
C) specialization and trade.
D) early craftsmen handing down their knowledge.

Accepted Answer

Specialization and trade allow for a division of labor where individuals or firms focus on producing specific goods or services in which they have a comparative advantage, and then trade with others for the goods and services they need. This results in a wide variety of goods and services being available in the market. The other options, government regulations, home production, and early craftsmen, may have played a role in the past, but the main driver of variety in today's economy is specialization and trade.

Question 8

As trade becomes more widespread, specialization ______, which in turn ______ productivity.
A) decreases; decreases
B) increases; increases
C) decreases; increases
D) increases; decreases

Accepted Answer

Trade allows for specialization, meaning that individuals and countries can focus on producing goods and services that they are most efficient in, while relying on others for goods and services they are less efficient in. This specialization leads to an increase in productivity as resources are allocated more efficiently, resulting in an increase in output.

Question 9

If the goal of education were solely to support economic growth, the ideal graduate would be a:
A) jack-of-all-trades but master of none (where a "jack" is a serviceable tradesperson).
B) jack-of-one-trade and master of one.
C) jack-of-no-trades and master of none.
D) jack-of-some-trades but master of none.

Accepted Answer

If the goal of education were solely to support economic growth, then the ideal graduate would need to have one specific skill that they are a master at, as this would make them more productive and valuable in the workforce. Therefore, the best choice would be B, where the graduate is a "jack-of-one-trade," meaning they have one specific skill they have mastered.

Question 10

Utilizing comparative advantage can best be exemplified as:
A) your lawyer word-processing her own legal briefs.
B) the CEO of Microsoft programming his own computer.
C) the president of your university teaching a class again.
D) a world-renowned chef hiring someone to cook meals for his family.

Accepted Answer

Utilizing comparative advantage means focusing on the tasks that you are most efficient at and outsourcing the tasks you are less efficient at to others. A world-renowned chef hiring someone to cook meals for his family is the best example of this principle. The chef can focus on creating new recipes and training staff while outsourcing the cooking of meals to someone who may be less skilled but more efficient at it.

Question 11

Absolute advantage derives from which of the following?
A) the lowest cost of production
B) the most suitable climate
C) the least expensive labor force
D) the best educated labor force

Accepted Answer

Absolute advantage is achieved by producing a good or service at the lowest cost compared to other producers. This can be due to factors such as access to cheaper raw materials, more efficient production processes, or economies of scale. Therefore, the choice that best fits this definition is A, the lowest cost of production.

Question 12

Fourteenth-century potters in the Chinese city of Jingdezhen developed the technology to heat a kiln at 1,300 degrees Celsius and produce porcelain, or "china," which was particularly popular in Persia where the Koran forbade serving food on gold or silver and wealthy families were anxious for a legal way to impress their dinner guests. The potters also imported Persian cobalt to create the blue dye for the porcelain (local cobalt was not as bold in color). Which advantage(s) from trade is(are) illustrated in this passage?
A) differences in preferences
B) specialization
C) comparative advantage
D) The passage illustrates all of these advantages.

Accepted Answer

The passage illustrates all three advantages of trade. Differences in preferences are demonstrated by the fact that Persians preferred porcelain over gold or silver for serving food. Specialization is demonstrated by the fact that the potters in Jingdezhen developed the technology to produce porcelain, which became their specialty. Finally, the use of imported cobalt from Persia illustrates comparative advantage, as the local cobalt did not produce the desired color.

Question 13

Trade barriers like the Berlin Wall:
A) increased the number of scientists and engineers.
B) added billions of minds to the global division of knowledge.
C) decreased innovation and global cooperation.
D) prevented restrictive monopolistic practices.

Accepted Answer

Trade barriers like the Berlin Wall decreased innovation and global cooperation by creating barriers to the flow of ideas and information between countries.

Question 14

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?
A) Owen Wilson has fully specialized in action comedy movies while Tom Cruise has fully specialized in serious action movies.
B) Due to filmography protectionism, Owen Wilson is unable to secure serious action roles, and Tom Cruise is unable to secure action comedy roles.
C) Casting directors see Owen Wilson as relatively better at action comedy roles and Tom Cruise as relatively better at serious action roles and cast them accordingly.
D) Owen Wilson does not have the talent necessary to act in more serious films.

Accepted Answer

The theory of specialization suggests that individuals or organizations should focus on a narrow range of skills, tasks, or products in order to achieve greater efficiency and productivity. In the case of actors, specialization can refer to a particular genre or type of role that they are known for and excel at. Based on their past film roles, casting directors may see Owen Wilson as particularly well-suited for action comedy movies and Tom Cruise for serious action movies, leading to more offers for those types of roles. This does not necessarily mean that Wilson is incapable of serious roles or that Cruise lacks comedic skills, but rather that they are recognized for their respective strengths in certain areas.

Question 15

Which of the following best explains the term "specialization" with respect to trade?
A) Specialization occurs when a people concentrate their productive resources on the goods and services they can produce most efficiently.
B) Specialization occurs when one person can produce more of a particular good than another person.
C) Specialization refers to the absolute advantage that a person enjoys in the production of goods and services.
D) Specialization refers to the ability of a person to produce more of a good than his or her trading partners.

Accepted Answer

Specialization refers to a situation where a nation or individual focuses on producing a specific good or service, which they can produce efficiently with fewer resources. This allows for increased productivity and efficiency, which ultimately can lead to increased trade and economic growth. Choice A best explains this concept.

Question 16

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?
A) The opportunity cost of painting a house is higher for Alex Rodriguez than for the high school student.
B) The opportunity cost of painting a house is lower for Alex Rodriguez than for the high school student.
C) The opportunity cost of painting a house is the same for Alex Rodriguez as for the high school student.
D) The opportunity cost of painting a house is zero for Alex Rodriguez and is negative for the high school student.

Accepted Answer

The opportunity cost of painting a house is the cost of the next best alternative foregone. Alex Rodriguez, being a famous baseball player, could earn a lot more money by playing baseball or doing other activities related to his profession. Therefore, for him, the opportunity cost of painting his house is higher compared to a high school student who may not have such lucrative alternatives available.

Question 17

Why do people specialize?
A) Specialization increases productivity.
B) Specialization decreases people's dependence on one another.
C) People become self-sufficient when they specialize.
D) Most people only know how to do a few tasks.

Accepted Answer

Specialization allows individuals to hone their skills and become more efficient at completing a particular task or set of tasks, which ultimately leads to increased productivity.

Question 18

Without trade, the knowledge used by an entire economy would be about the same as the knowledge had by:
A) all intelligent people combined.
B) a large number of people.
C) one person.
D) no one.

Accepted Answer

Without trade, an economy would be completely isolated, meaning that the knowledge available to that economy would be limited to what can be known by the people within that economy. Since there is no sharing of knowledge or ideas from outside sources, the knowledge available would be restricted to the knowledge of a single person or a group of people within the economy. Therefore, the best choice is C, representing one person with limited knowledge.

Question 19

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?
A) Jesse and Addae should tutor Jordan in both math and social skills.
B) Jesse should teach math and Addae should teach how to make friends.
C) Jesse and Addae should both teach how to make friends.
D) Jesse should teach how to make friends and Addae should teach math.

Accepted Answer

The answer of Jesse is good at math and excellent...

Question 20

The relationship between trade and specialization is best characterized as follows:
A) Trade decreases specialization, which in turn increases the demand for trade.
B) Trade decreases specialization, which in turn decreases the demand for trade.
C) Trade increases specialization, which in turn increases the demand for trade.
D) Trade increases specialization, which in turn decreases the demand for trade.

Accepted Answer

Trade allows for countries to specialize in the production of goods and services that they have a comparative advantage in, leading to increased efficiency and productivity. As a result, specialization increases the demand for trade as countries seek to exchange their specialized goods and services with others.

Quiz 2: The Power of Trade and Comparative

The ability of one producer to produce one good or service using fewer inputs than another producer is:

Which of the following is typically a result of the division of knowledge?

Which of the following best describes the principle of comparative advantage?

A rock carving from ancient Norway depicts two identical people doing different jobs in the same boat: one uses a bow to hunt while the other paddles. How does this early example illustrate the benefits of trade?

Economies can grow due to:

The enormous variety of goods and services that we consume each day can be attributed mainly to:

As trade becomes more widespread, specialization , which in turn productivity.

If the goal of education were solely to support economic growth, the ideal graduate would be a:

Utilizing comparative advantage can best be exemplified as:

Absolute advantage derives from which of the following?

Trade barriers like the Berlin Wall:

Owen Wilson is an actor who has acted in many action comedy films. In contrast, Tom Cruise has acted in many serious action films. How might the theory of specialization be applied to them?

Which of the following best explains the term "specialization" with respect to trade?

Suppose a famous baseball player, Alex Rodriguez, hires a high school student to paint his house. Which of the following is most likely TRUE?

Why do people specialize?

Without trade, the knowledge used by an entire economy would be about the same as the knowledge had by:

Jesse is good at math and excellent at making friends and Addae is equally good at both. Mathematically and socially challenged Jordan wants to hire tutors to help in each area. Who should tutor Jordan in which area to maximize Jordan's college experience?

The relationship between trade and specialization is best characterized as follows: