Chapter 3 Practice: Interdependence and Gains from Trade

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Quiz by mfloyd6, updated more than 1 year ago
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Chapter 3

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Question 1

Question
In an hour, David can wash 2 cars or mow 1 lawn, while Ron can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?
Answer
  • David in washing, Ron in mowing.
  • Ron in washing, David in mowing.
  • David in washing, neither in mowing.
  • Ron in washing, neither in mowing.

Question 2

Question
in an hour, David can wash 2 cars or mow 1 lawn, while Ron can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?
Answer
  • David in washing, Ron in mowing
  • Ron in washing, David in mowing
  • David in washing, neither in mowing.
  • Ron in washing, neither in mowing.

Question 3

Question
When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,
Answer
  • they both obtain consumption outside their production possibilities frontier.
  • they both obtain consumption inside their production possibilities frontier.
  • one individual consumes inside his production possibilities frontier, while the other consumes outside his.
  • each individual consumes a point on his own production possibilities frontier.

Question 4

Question
Which goods will a nation typically import?
Answer
  • those goods in which the nation has an absolute advantage
  • those goods in which the nation has a comparative advantage
  • those goods in which other nations have an absolute advantage
  • those goods in which other nations have a comparative advantage

Question 5

Question
Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor, while producing a shirt takes 4 hours of labor. What will these nations trade?
Answer
  • China will export aircraft, while the United States will export shirts.
  • China will export shirts, while the United States will export aircraft.
  • Both nations will export shirts.
  • There are no gains from trade in this situation.

Question 6

Question
Mark can cook dinner in 30 minutes and wash the laundry in 20 minutes. His roommate takes half as long to do each task. How should the roommates allocate the work?
Answer
  • Mark should do more of the cooking based on his comparative advantage
  • Mark should do more of the washing based on his comparative advantage.
  • Mark should do more of the washing based on his absolute advantage.
  • There are no gains from trade in this situation.

Question 7

Question
Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' production possibilities frontier?
Answer
  • (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars)
  • (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars)
  • (200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)
  • (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)

Question 8

Question
Indonesia's opportunity cost of producing bananas is...
Answer
  • 2.5 units of rice. This is lower than India's opportunity cost of producing bananas.
  • 2.5 units of rice. This is higher than India's opportunity cost of producing bananas.
  • 2/5 units of rice. This is lower than India's opportunity cost of producing bananas.
  • 2/5 units of rice. This is higher than India's opportunity cost of producing bananas.

Question 9

Question
India's opportunity cost of producing rice is
Answer
  • 2 units of bananas. This is lower than Indonesia's opportunity cost of producing rice.
  • 2 units of bananas. This is higher than Indonesia's opportunity cost of producing rice.
  • 1/2 units of bananas. This is lower than Indonesia's opportunity cost of producing rice.
  • 1/2 units of bananas. This is higher than Indonesia's opportunity cost of producing rice.

Question 10

Question
When can two countries gain from trading two goods?
Answer
  • when the first country can only produce the first good and the second country can only produce the second good
  • when the first country is better at producing both goods and the second country is worse at producing both goods
  • when the first country can produce both goods, but can only produce the second good at great cost, and the second country can produce both goods, but can only produce the first good at great cost
  • Two countries could gain from trading two goods under all of the above conditions

Question 11

Question
for which good(s) does Indonesia have a comparative advantage
Answer
  • rice but not bananas.
  • rice and bananas.
  • nether rice nor bananas.
  • bananas but not rice.

Question 12

Question
At which of the following prices, if any, can India and Indonesia both gain from trade?
Answer
  • 1/3 units of bananas per unit of rice
  • 1/5 units of bananas per unit of rice.
  • 3/5 units of bananas per unit of rice
  • none of the above.

Question 13

Question
The opportunity cost of an item is
Answer
  • always less than the dollar value of the item.
  • the number of hours that one must work in order to buy one unit of the item.
  • what you give up to get that item.
  • always greater than the cost of producing the item.

Question 14

Answer
  • an absolute and comparative advantage producing good x.
  • a comparative but not an absolute advantage producing good x.
  • neither a comparative nor an absolute advantage producing good x.
  • an absolute but not a comparative advantage producing good x.

Question 15

Question
The producer that requires a smaller quantity of inputs to produce a certain amount of a good, relative to the quantities of inputs required by other producers to produce the same amount of that good,
Answer
  • has a low opportunity cost of producing that good, relative to the opportunity costs of other producers.
  • should be the only producer of that good.
  • has a comparative advantage in the production of that good.
  • has an absolute advantage in the production of that good.

Question 16

Question
If the production possibilities frontier is a straight line, then "?" must be
Answer
  • 200
  • 400
  • 500
  • 300
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