EC120 Chapter Notes - Chapter 3: Absolute Advantage, Comparative Advantage, Opportunity Cost

A bowed out PPF reflects which of the following ideas?

i.increasing opportunity cost

ii. resources are not equally productive in all activities

iii. prices of goods increase over time

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QUESTION 2

With no international trade, a country ________ consume at a point outside of its PPF; with international trade, a country ________ consume at a point outside of its PPF.

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QUESTION 3

If the production possibilities frontier between two goods is a straight line, then the

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QUESTION 4

As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?

1 point

QUESTION 5

"Comparative advantage" is defined as a situation in which one person can produce

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QUESTION 6

When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost

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QUESTION 7

A bowed out production possibility frontier shows that the

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QUESTION 8

Which of the following statements is correct?

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QUESTION 9

A major earthquake occurs in the central part of the United States. What impact would this have on the nation's production possibilities frontier and why?

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QUESTION 10

When a nation is producing on its production possibilities frontier, if more resources are used to produce one good, then the production of other goods

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QUESTION 11

Moving along a country's PPF, a reasonable opportunity costs increase is that

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QUESTION 12

A reason the production possibilities frontier exists is

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QUESTION 13

Moving from one point to another on a production possibilities frontier implies

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QUESTION 14

Specialization and trade make a country better off because with trade the country can consume at a point

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QUESTION 15

The production possibilities frontier is the

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QUESTION 16

The opportunity cost of economic growth is ________ and the benefit of economic growth is ________.

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QUESTION 17

In terms of a nation's production possibilities frontier, what impact does international trade have?

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QUESTION 18

The production possibilities frontier illustrates the

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QUESTION 19

As we move along the production possibilities frontier,

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QUESTION 20

What is the opportunity cost of economic growth?

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QUESTION 21

Which of the following statements is correct?

i.As the economy grows, the opportunity costs of economic growth decrease.

ii. Economic growth has no opportunity cost.

iii. The opportunity cost of economic growth is current consumption forgone.

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QUESTION 22

Does economic growth depend upon which of the following?

i. Increasing the quantity of labor.

ii. Lowering the prices of goods and services.

iii. Advancing technology.

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QUESTION 23

When drawing a production possibilities frontier, which of the following is held constant?

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QUESTION 24

To increase its economic growth, a nation should

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QUESTION 25

The opportunity cost of one more slice of pizza in terms of sodas is the

The opportunity cost of one more slice of pizza in terms of sodas is the

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QUESTION 2

A production possibilities frontier shows

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QUESTION 3

When a production possibilities frontier is bowed outward, as more of one good is produced, its opportunity cost

1 point

QUESTION 4

When all of the available factors of production are being efficiently employed, the

1 point

QUESTION 5

If a nation devotes a larger share of its current production to consumer goods, then

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QUESTION 6

A point on the production possibilities frontier reflects an

1 point

QUESTION 7

When drawing a production possibilities frontier, which of the following is held constant?

1 point

QUESTION 8

As we move along the production possibilities frontier,

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QUESTION 9

Which of the following is an assumption used when drawing a production possibilities frontier?

i.Human wants and desires are limited to what is available.

ii. Only two goods are considered.

iii. The level of technology is fixed and unchanging.

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QUESTION 10

To achieve gains from trade, a country

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QUESTION 11

Relative to Al, Joe has ________ if Joe can produce a good at a lower opportunity cost than Al.

1 point

QUESTION 12

Does economic growth depend upon which of the following?

i.Improving the quality of labor

ii. Technological advancement

iii. Increasing the amount of capital

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QUESTION 13

In one hour John can produce 20 loaves of bread or 18 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is true?

1 point

QUESTION 14

As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?

1 point

QUESTION 15

The production possibilities frontier illustrates the

1 point

QUESTION 16

The United States produced approximately ________ worth of goods and services in 2007.

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QUESTION 17

The fact of increasing opportunity cost when moving on the PPF means that

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QUESTION 18

Other things equal, if India devotes more resources to educate its population than China,

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QUESTION 19

For Ireland to grow more potatoes, wool production must decrease. This situation is an example of

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QUESTION 20

Moving from one point to another on a production possibilities frontier implies

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QUESTION 21

The United States is one of the richest nations in the world,

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QUESTION 22

"Comparative advantage" is defined as a situation in which one person can produce

1 point

QUESTION 23

The idea of increasing opportunity cost is reflected in the

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QUESTION 24

Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are true for the first country?

i)It enjoys gains from trade.

ii)It must have an absolute advantage in the production of the good it produces.

iii)It is producing at a point beyond its PPF.

1 point

QUESTION 25

If society moves from a period of time with significant unemployment to a time with full employment, its production possibilities frontier will

1 point

For which of the following nations does international trade account for the largest percentage of GDP?
A) Japan
B) The Netherlands
C) Germany
D) Great Britain
E) the United States

2. Suppose that workers in Transylvania can produce only two goods-- yo-yos or sweat socks. The Transylvanian currency is the dealer. In what unit is the opportunity cost of yo-yos measured?
A) dealers
B) dealers per yo-yo
C) dealers per sweat sock
D) yo-yos
E) sweat socks

3. For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?
A) The opportunity cost of producing watches is lower in Denmark.
B) The opportunity cost of producing cheese is lower in Denmark.
C) The opportunity cost of producing watches is identical in both countries.
D) It is impossible to compare opportunity costs because the two countries use different currencies.
E) In Germany the opportunity cost of producing one pound of cheese is one watch.

4. For each bow the Romans are producing, they give up the opportunity to make 10 arrows. The Dacians are giving up producing2 bows for every 40 arrows they are producing. Which of the following is true regarding comparative advantage?
A) The Romans have a comparative advantage in producing arrows
B) The Romans have a comparative advantage in producing bows
C) The Romans have a comparative advantage in producing arrows and bows
D) The Dacians have a comparative advantage in producing arrows and bows
E) The Dacians have a comparative advantage in producing bows

5. Which of the following is not a basis for trade between two nations?
A) different skill levels of the labor forces
B) one nation's absolute advantage
C) a difference in tastes between countries
D) economies of scale
E) different capital stocks

6. The opportunity cost of producing one car in Germany is 2,000bushels of wheat, and the opportunity cost of producing one car in Canada is 1,200 bushels of wheat. The two countries can realize mutual gains from trade if they agree on terms of trade that are
A) greater than 2,000 bushels of wheat per car
B) less than 1,200 bushels of wheat per car
C) greater than 1,200 bushels of wheat per car and less than 2,000bushels of wheat per car, and Germany produces wheat
D) greater than 1,200 bushels of wheat per car and less than 2,000bushels of wheat per car, and Germany produces cars
E) greater than 1,200 bushels of wheat per car and less than 2,000bushels of wheat per car, and each country produces both goods

7. The rate at which two countries trade one good for another
A) is known as the foreign exchange rate
B) is known as the terms of trade
C) is known as the export line
D) equals the slope of the import line
E) equals the common slope of the countries' production possibilities frontiers

8. Which of the following is true?
A) International trade makes it possible for a country's consumption possibilities to exceed its production possibilities.
B) International trade requires that a country's production possibilities exceed its consumption possibilities.
C) A country's production possibilities always equal its consumption possibilities.
D) A country's consumption possibilities can never equal its production possibilities because of leakages in the system.
E) As long as there is full employment of resources, a country's production possibilities will exceed its consumption possibilities even with trade.

9. Which of the following is not a reason for international specialization?
A) some countries have educated, trained workers, while other countries have unskilled workers
B) tastes and preferences tend to be different in different countries
C) economies of scale can allow larger, specialized producers to operate at a lower average cost
D) mineral resources are often concentrated in particular countries
E) the world price of a good is determined by the world supply and demand for it

10. Ad valorem tariffs on imports are based on a percentage of an import's value; specific tariffs are based on a lump sum per physical unit imported.
A) True
B) False