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Chapter 3

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Department
Economics
Course
ECN 104
Professor
Tsogbadral Galaabaatar
Semester
Winter

Description
Chapter 3 1. If there is no trade, which of the following is most likely? a. A country is better off because it will become self-sufficient. b. A country's production possibilities frontier is also its consumption possibilities frontier. c. A country can still benefit from international specialization. d. More product variety is available in a country. 2. If there is trade, which of the following is most likely? a. A country is worse off because it becomes dependent on other countries. b. A country will produce a greater variety of goods and services to trade. c. A country's consumption possibilities frontier can be outside its production possibilities frontier. d. A country will experience a lower unemployment rate. 3. When will a production possibilities frontier be linear and not bowed out? a. If no tradeoffs exist. b. If the tradeoff between the two goods is always at a constant rate. c. If unemployment is zero. d. If resources are allocated efficiently. 4. Which of the following is NOT correct? a. Trade allows for specialization. b. Trade is good for nations. c. Trade is based on absolute advantage. d. Trade allows individuals to consume outside of their individual production possibilities curve. Table 3-1 Labour Hours Needed to Make 1 Kg of: Kilograms produced in 40 hours: Meat Potatoes Meat Potatoes Farmer 8 2 5 20 Rancher 4 5 10 8 5. Refer to Table 3-1. What is the opportunity cost of 1 pound of meat for the Farmer? a. 1/4 hour of labour. b. 4 hours of labour. c. 4 kg of potatoes. d. 1/4 kg of potatoes. 6. Refer to Table 3-1. What is the opportunity cost of 1 kg of potatoes for the Rancher? a. 4 hours of labour. b. 5 hours of labour. c. 5/4 kg of meat. d. 4/5 kg of meat. 7. Refer to Table 3-1. Which of the following is correct? a. The Farmer has an absolute advantage in meat, and the Rancher has an absolute advantage in potatoes. b. The Farmer has an absolute advantage in potatoes, and the Rancher has an absolute advantage in meat. c. The Farmer has an absolute advantage in meat, and the Rancher has an absolute advantage in meat. d. The Farmer has an absolute advantage in neither good, and the Rancher has an absolute advantage in both goods. Table 3-2 Labour Hours Kilograms Needed to Make Produced in 40 1 kilogram of: Hours: Meat Potatoes Meat Potatoes Farmer 4 1 10 40 Rancher 4 5 10 8 8. Refer to Table 3-2. What is the opportunity cost of 1 kilogram of meat for the Rancher? a. 4 hours of labour. b. 5 hours of labour. c. 5/4 kilograms of potatoes. d. 4/5 kilogram of potatoes. 9. Refer to Table 3-2. What is the opportunity cost of 1 kilogram of potatoes for the Farmer? a. 8 hours of labour. b. 2 hours of labour. c. 4 kilograms of meat. d. 1/4 kilogram of meat. 10. Refer to Table 3-2. Which of the following is correct? a. The Farmer has an absolute advantage in neither good, and the Rancher has a comparative advantage in meat. b. The Farmer has an absolute advantage in meat, and the Rancher has a comparative advantage in potatoes. c. The Farmer has an absolute advantage in potatoes, and the Rancher has a comparative advantage in meat. d. The Farmer has an absolute advantage in neither good, and the Rancher has a comparative advantage in potatoes. Figure 3-1 11. Refer to Figure 3-1. If Paul divides his time equally between corn and wheat, what will he be able to produce? a. 2 bushels of wheat and 2 bushels of corn. b. 3 bushels of wheat and 3 bushels of corn. c. 4 bushels of wheat and 5 bushels of corn. d. 4 bushels of wheat and 6 bushels of corn. 12. Refer to Figure 3-1. What is the opportunity cost of 1 bushel of wheat for Cliff? a. 1/3 bushel of corn. b. 2/3 bushel of corn. c. 1 bushel of corn. d. 3/2 bushels of corn. 13. Refer to Figure 3-1. Assume that both Paul and Cliff divide their time equally between the production of corn and wheat, and they do not trade. If they were the only producers of corn and wheat, what would the total production of wheat and corn be? a. 8 bushels of wheat and 7 bushels of corn. b. 7 bushels of wheat and 6 bushels of corn. c. 6 bushels of wheat and 8 bushels of corn. d. 7 bushels of wheat and 7 bushels of corn. 14. Refer to Figure 3-1. Assume that Cliff and Paul were both producing wheat and corn, and each was dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. What would happen to the total production of corn? a. Increase by 1 bushel. b. Increase by 3 bushels. c. Increase by 5 bushels. d. Decrease by 2 bushels. 15. Refer to Figure 3-1. Which of the following is true for Cliff and Paul? a. Paul has an absolute advantage in both wheat and corn. b. Paul has an absolute advantage in wheat and Cliff has an absolute advantage in corn. c. Cliff has an absolute advantage in wheat and Paul has an absolute advantage in corn. d. Cliff has an absolute advantage in both wheat and corn. Figure 3-2 16. Refer to Figure 3-2. What is the opportunity cost of 1 pair of tap shoes for Fred? a. 1/3 pair of ballet slippers. b. 1/5 pair of ballet slippers. c. 3/5 pair of ballet slippers. d. 5/3 pairs of ballet slippers. 17. Refer to Figure 3-2. What is the opportunity cost of 1 pair of tap shoes for Ginger? a. 1/4 pair of ballet slippers. b. 1/3 pair of ballet slippers. c. 3/4 pair of ballet slippers. d. 4/3 pairs of ballet slippers. 18. Refer to Figure 3-2. Which of the following is correct? a. Ginger has an absolute advantage in ballet slippers and Fred has an absolute advantage in tap shoes. b. Ginger has an absolute advantage in tap shoes and Fred has an absolute advantage in ballet slippers. c. Ginger has an absolute advantage in neither good and Fred has an absolute advantage in both goods. d. Ginger has an absolute advantage in both goods and Fred has an absolute advantage in neither good. 19. Refer to Figure 3-2. What should Fred produce? a. Only tap shoes. b. Only ballet slippers. c. Both ballet slippers and tap shoes. d. Neither ballet slippers nor tap shoes. 20. Refer t
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