B) Pete has an absolute advantage in both assembling packets and stuing envelopes.
C) Deb has a comparative advantage in stuing envelopes.
D) Deb has an absolute advantage in both assembling packets and stuing envelopes.
E) Deb has a comparative advantage in both assembling packets and stuing envelopes.
Answer: C
Topic: Comparative advantage
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
36) Deb and Pete have volunteered to help their favorite charity mail out fundraiser
information. The igure above shows their production possibilities frontiers for assembling
packets and stuing envelopes. If Deb and Pete specialize and trade, how many packets
will be assembled?
A) 40
B) more than 40 and less than 80
C) 80
D) 160
E) more than 80 and less than 160
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
71
37) Gabriel operates a ranch in Idaho where he raises cattle and grows potatoes. The igure
above illustrates his production possibilities frontier. What is Gabriel’s opportunity cost of
growing another ton of potatoes?
A) 400 cows
B) 80 cows
C) 100 cows
D) 0 cows
E) 1 ton of potatoes
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
38) Gabriel operates a ranch in Idaho where he raises cattle and grows potatoes. The igure
above illustrates his production possibilities frontier. What is Gabriel’s opportunity cost of
raising another 100 cows?
A) 1.25 tons of potatoes
B) 5.0 tons of potatoes
C) 3.0 tons of potatoes
D) 1.0 ton of potatoes
E) 100 cows
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
72
39) In the above igure, Jack’s opportunity cost of producing 1 gallon of soda is ________ of
bottled water.
A) 1 gallon
B) 1/2 of a gallon
C) 6 gallons
D) 1/4 of a gallon
E) 2 gallons
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
40) In the above igure, Jack’s opportunity cost of producing 1 gallon of bottled water is
________ of soda.
A) 2 gallons
B) 1/2 of a gallon
C) 6 gallons
D) 1/4 of a gallon
E) 1 gallon
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
73
41) In the above igure, Jill’s opportunity cost of producing 1 gallon of soda is ________ of
bottled water.
A) 2 gallons
B) 1/2 of a gallon
C) 4 gallons
D) 1 gallon
E) 1/4 of a gallon
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
42) In the above igure, Jill’s opportunity cost of producing 1 gallon of bottled water is
________ of soda.
A) 2 gallons
B) 1/2 of a gallon
C) 4 gallons
D) 1 gallon
E) 1/4 of a gallon
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
43) Using the igure above, if Jack and Jill specialize and gain from trade, then
A) Jack produces equal amounts of gallons of water and bottled water.
B) Jack specializes in the production of bottled water.
C) Jack and Jill produce beyond their PPF.
D) Jack specializes in the production of soda.
E) Jack specializes on the production of soda and water.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
74
44) The igure above shows the production possibilities frontiers for the United Kingdom
and France. What is the opportunity cost of one bushel of wheat in France?
A) 1/4 of a pound of ish
B) 4 pounds of ish
C) 1 pound of ish
D) 100 pounds of ish
E) 2 pounds of ish
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
45) The igure above shows the production possibilities frontiers for the United Kingdom
and France. What is the opportunity cost of one bushel of wheat for the United Kingdom?
A) 1/4 of a pound of ish
B) 1/2 of a pound of ish
C) 1 pound of ish
D) 200 pounds of ish
E) 2 pounds of ish
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
75
46) The igure above shows the production possibilities frontiers for the United Kingdom
and France. If the United Kingdom and France specialize and engage in trade, the United
Kingdom will produce ________ and France will produce ________.
A) wheat; wheat
B) wheat; ish
C) ish; wheat
D) ish; ish
E) both wheat and ish; both wheat and ish
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
47) The igure above shows the production possibilities frontiers for the United Kingdom
and France. If the United Kingdom and France specialize and engage in trade, the United
Kingdom will export ________ and France will export ________.
A) wheat; wheat
B) wheat; ish
C) ish; wheat
D) ish; ish
E) nothing; nothing
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
48) What is gained when people engage in specialization and trade?
A) Specialization and trade allow people to consume outside their individual production
possibilities frontiers.
B) Specialization and trade allow people to consume inside their production possibilities
frontiers.
C) Specialization and trade allow people to consume at a point on their production
possibilities frontiers.
D) Specialization and trade allow people to produce outside their individual production
possibilities frontiers.
E) There are no gains from specialization and trade.
Skill: Level 2: Using deinitions
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
76
49) Gains from trade
A) occur when one party to the trade has an absolute advantage in both goods.
B) result in being able to consume beyond the trading individuals’ production possibilities
frontiers.
C) occur when people do not specialize.
D) occur when opportunity costs are equal.
E) always beneit one party but not the other party of any trade.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
50) Consider the United States’ production of soy beans and running shoes. If the United
States has an absolute advantage in the production of both goods compared to China,
A) both countries can gain from trade.
B) only the United States can gain from trade.
C) only China can gain from trade.
D) each country will be able to produce at a point beyond its PPF.
E) only the United States will be able to operate beyond its PPF.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
51) To achieve gains from trade, a country
A) needs to have an absolute advantage in the production of all goods.
B) specializes in the producing a good in which it has a lower opportunity cost.
C) must produce at a point beyond its PPF.
D) should produce at the midpoint of its PPF.
E) needs to have an absolute advantage in the production of at least one good.
Skill: Level 2: Using deinitions
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
77
52) Specialization and trade
A) does not beneit anyone.
B) allows nations to produce inside their individual production possibilities frontier.
C) allows nations to consume combinations of products that are outside their individual
production possibilities frontier.
D) shifts the production possibilities frontier inward.
E) shifts the production possibilities frontier outward.
Skill: Level 2: Using deinitions
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
53) The United States is one of the richest nations in the world,
A) so it does not need to trade with poor nations in order to achieve any gains from trade.
B) so it might not have a comparative advantage in producing any goods.
C) but it can still beneit from specialization and trade.
D) so it must have a comparative advantage in the production of all goods.
E) so it must have an absolute advantage in the production of all goods.
Skill: Level 4: Applying models
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
54) Specialization and trade make a country better of because with trade, the country can
consume at a point
A) outside its production possibilities frontier.
B) inside its production possibilities frontier.
C) on its production possibilities frontier.
D) on its trading partner’s production possibilities frontier.
E) inside its trading partner’s production possibilities frontier.
Skill: Level 2: Using deinitions
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
78
55) By specializing and trading, a country is able to
A) obtain the absolute advantage in the goods it produces.
B) consume but not to produce combinations of goods that lie beyond its production
possibilities frontier.
C) produce but not to consume combinations of goods that lie beyond its production
possibilities frontier.
D) both produce and consume combinations of goods that lie beyond its production
possibilities frontier.
E) neither produce nor consume combinations of goods that lie beyond its production
possibilities frontier.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
56) 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.
A) cannot; can
B) can; cannot
C) can; can
D) cannot; cannot
E) None of the above answers is correct because the presence or absence of international
trade has nothing to do with where a country consumes in comparison to its PPF.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
57) In terms of a nation’s production possibilities frontier, what impact does international
trade have?
A) International trade shifts the nation‘s production possibilities frontier outward.
B) International trade shifts the nation’s production possibilities frontier inward.
C) International trade allows the nation to consume at a point outside its production
possibilities frontier.
D) International trade shifts the production possibilities frontier outward for the goods that
are exported and inward for the goods that are imported.
E) International trade shifts the production possibilities frontier outward for the goods that
are imported and inward for the goods that are exported.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
79
58) The gains from trade include:
i. lower prices from competition
ii. greater output from specialization
iii. greater variety of goods and services available
A) i and iii only
B) ii and iii only
C) i and ii only
D) i, ii, and iii
E) ii only
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: New
AACSB: Relective thinking
59) If a nation has an absolute advantage in producing a good, then it
A) will have a comparative advantage in producing that good.
B) will have no need to trade with other nations.
C) will always specialize in that good.
D) might or might not have a comparative advantage in producing that good.
E) will not have a comparative advantage in producing that good.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Relective thinking
60) In one hour John can produce 20 loaves of bread or 8 cakes. In one hour Phyllis can
produce 30 loaves of bread or 15 cakes. Which of the following statements is true?
A) Phyllis has a comparative advantage in producing bread.
B) John has a comparative advantage in producing cakes.
C) Phyllis has an absolute advantage in both goods.
D) John has an absolute advantage in both goods.
E) Phyllis has a comparative advantage in producing both cakes and bread.
Skill: Level 3: Using models
Section: Checkpoint 3.4
Status: Old
AACSB: Analytical thinking
80