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11) John can make pizza at a lower opportunity cost than Allen, but Allen can make more pizzas
per day than John. Therefore,
A) John cannot benefit from trade with Allen.
B) Allen cannot benefit from trade with John.
C) John has a comparative advantage in pizza.
D) John has an absolute advantage in pizza.
E) Allen has a comparative advantage in pizza.
12) Alice and Gene work in the mailroom, sorting and delivering mail. In order for them to
benefit from specialization and trade, Alice must
A) be able to both sort and deliver faster than Gene.
B) be equally productive in both sorting and delivering.
C) have a comparative advantage in both sorting and delivering.
D) have a comparative advantage in one task and Gene must have a comparative advantage in
the other task.
E) be equally productive as Gene in both sorting and delivering.
13) When one person's opportunity cost of producing a good is lower than another person's
opportunity cost of producing the same good, it is called
A) an absolute advantage.
B) a comparative advantage.
C) specialization.
D) production possibilities.
E) a trade off.
14) For country Gamma the opportunity cost for producing 1 computer is 10 tons of steel. For
country Beta the opportunity cost for producing 1 computer is 6 tons of steel. Which country has
the comparative advantage in the production of steel?
A) Gamma
B) Beta
C) Both have the comparative advantage in the production of steel.
D) Neither country has the comparative advantage in the production of steel.
E) More information is needed to determine which of the two nations has the comparative
advantage.
15) For country North, the opportunity cost incurred when 3 tractors are produced is 21 watches.
For country South, the opportunity cost incurred when 5 tractors are produced is 100 watches.
Which country has the comparative advantage in the production of tractors?
A) North
B) South
C) Both have the comparative advantage in the production of tractors.
D) Neither country has the comparative advantage in the production of tractors.
E) More information is needed about which country has the comparative advantage in the
production of watches.
16) If Country A can produce an extra plane by giving up two boats, and Country B can produce
an extra plane by giving up three boats, then
A) Country A has a comparative advantage over Country B in the production of planes.
B) Country B has a comparative advantage over Country A in the production of planes.
C) the two countries have no incentive to trade with one another.
D) Country A would like to trade with B, but B cannot gain by trading with A.
E) Country A has an absolute advantage in producing planes and a comparative advantage in
producing boats.
17) David takes 10 minutes to process a customer, and 20 minutes to stock the shelves. Danny
takes 15 minutes to process a customer, and 15 minutes to stock the shelves. Which of the
following statements is true?
A) David has an absolute advantage in performing both tasks.
B) Danny has an absolute advantage in performing both tasks.
C) David has a comparative advantage in processing customers but not in stocking shelves.
D) Danny has a comparative advantage in processing customers but not in stocking shelves.
E) Danny has a comparative advantage in processing customers and in stocking shelves.
18) Rika's opportunity cost of producing 100 t-shirts is 50 jackets. Jeff's opportunity cost of
producing 75 t-shirts is 25 jackets. Who should specialize in jackets?
A) Rika
B) Jeff
C) neither
D) both
E) More information is needed about their production possibilities frontiers to determine who
should specialize in jackets.
19) In the table above, Jack's opportunity cost for 1 pound of food is ________ and his
opportunity cost for 1 pound of clothing is ________.
A) 1 pound of clothing; 4 pounds of food
B) 1/2 of a pound of clothing; 2 pounds of food
C) 1/3 of a pound of clothing; 3 pounds of food
D) 2 pounds of clothing; 2 pounds of food
E) 1 pound of food; 1 pound of clothing
20) In the table above, Jill's opportunity cost for 1 pound of food is ________ and her
opportunity cost for 1 pound of clothing is ________.
A) 1 pound of clothing; 4 pounds of food
B) 1/2 of a pound of clothing; 2 pounds of food
C) 1/3 of a pound of clothing; 3 pounds of food
D) 2 pounds of clothing; 2 pounds of food
E) 1 pound of food; 1 pound of clothing
21) In the table above, Jack's comparative advantage is producing ________ and Jill's
comparative advantage is producing ________.
A) clothing; food
B) clothing and food; nothing
C) nothing; clothing and food
D) food; clothing
E) clothing; clothing
22) Deb and Pete have volunteered to help their favorite charity mail out fundraiser information.
The figure above shows their production possibilities frontiers for assembling packets and
stuffing envelopes. If Deb spends all her time assembling packets, how many can she assemble?
A) 32
B) 40
C) 64
D) 160
E) 22
23) Deb and Pete have volunteered to help their favorite charity mail out fundraiser information.
The figure above shows their production possibilities frontiers for assembling packets and
stuffing envelopes. What is Deb's opportunity cost of assembling 1 packet?
A) 160 envelopes
B) 40 envelopes
C) 4 envelopes
D) 1/4 of an envelope
E) 4 packets
24) Deb and Pete have volunteered to help their favorite charity mail out fundraiser information.
The figure above shows their production possibilities frontiers for assembling packets and
stuffing envelopes. Which of the following statements is correct?
A) Deb has a comparative advantage in assembling packets.
B) Pete has an absolute advantage in both assembling packets and stuffing envelopes.
C) Deb has a comparative advantage in stuffing envelopes.
D) Deb has an absolute advantage in both assembling packets and stuffing envelopes.
E) Deb has a comparative advantage in both assembling packets and stuffing envelopes.
25) Deb and Pete have volunteered to help their favorite charity mail out fundraiser information.
The figure above shows their production possibilities frontiers for assembling packets and
stuffing 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
26) Gabriel operates a ranch in Idaho where he raises cattle and grows potatoes. The figure
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
27) Gabriel operates a ranch in Idaho where he raises cattle and grows potatoes. The figure
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
28) In the above figure, 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
29) In the above figure, 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
30) In the above figure, 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
31) In the above figure, 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
32) Using the figure 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.
33) The figure 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 fish
B) 4 pounds of fish
C) 1 pound of fish
D) 100 pounds of fish
E) 2 pounds of fish
34) The figure 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 fish
B) 1/2 of a pound of fish
C) 1 pound of fish
D) 200 pounds of fish
E) 2 pounds of fish
35) The figure 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; fish
C) fish; wheat
D) fish; fish
E) both wheat and fish; both wheat and fish
36) The figure 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; fish
C) fish; wheat
D) fish; fish
E) nothing; nothing
37) 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.
38) 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 benefit one party but not the other party of any trade.
39) 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.
40) Specialization and trade
A) does not benefit 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.
41) The United States is one of the richest nations in the world,
A) so does not need to trade with poor nations in order to achieve any gains from trade.
B) so might not have a comparative advantage in producing any goods.
C) but it can still benefit 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.
42) Specialization and trade make a country better off 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.
43) 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.
44) 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 are correct because the presence or absence of international trade
has nothing to do with where a country consumes in comparison to its PPF.
45) 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.
46) 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.
47) If Wendy can produce more of all goods than Tommy, then
A) Wendy has an absolute advantage in all goods.
B) Wendy does not need to trade with Tommy in order to achieve the gains from trade.
C) Wendy has a comparative advantage in all goods.
D) Tommy has an absolute advantage in all goods.
E) Only Tommy but not Wendy can benefit from trade between the two of them.
48) Mac can bake more cookies than Monica per hour. It must be true that
A) Monica has an absolute advantage in cookie baking.
B) Mac has an absolute advantage in baking cookies.
C) Mac has a comparative advantage in baking cookies.
D) Monica has a comparative advantage in baking cookies.
E) Mac cannot benefit by trade between the two of them.
49) If Toni has an absolute advantage in both sewing and ironing when compared to Tom, then
A) they might benefit from trading, but we need more information to determine in which task
they should specialize.
B) neither Toni nor Tom can benefit from trading with each other.
C) Toni should specialize in sewing and Tom should specialize in ironing.
D) Toni cannot benefit from trading with Tom but Tom can benefit from trading with Toni.
E) Tom cannot benefit from trading with Toni but Toni can benefit from trading with Tom.
50) Having an absolute advantage
A) is the basis for specialization and trade.
B) means having a higher opportunity cost than the trading partner.
C) means having a lower opportunity cost than the trading partner.
D) means being able to produce more of each product than the trading partner.
E) means having a comparative advantage in production of the same goods.
51) If a country has
A) an absolute advantage in producing a good, it definitely also has a comparative advantage in
producing that good.
B) an absolute advantage in producing a good, it might or might not have a comparative
advantage in producing that good.
C) a comparative advantage in production of a good, it must also have an absolute advantage in
producing that good.
D) an absolute advantage in producing a good, it definitely will not have a comparative
advantage in producing that good.
E) None of the above answers is correct.
52) When Mik has an absolute advantage in the production of two goods over Tommy, Mik
A) is less productive than Tommy.
B) is better off if he does not engage in specialization and trade with Tommy.
C) is more productive in producing both goods than Tommy.
D) always has a comparative advantage over Tommy in the production of both goods.
E) cannot gain from trade with Tommy.
53) If John can produce 10 chairs or 20 lamps during a week while Mary can produce 12 chairs
or 22 lamps in the same time, who has the absolute advantage in producing each good?
A) Mary in producing both goods
B) John in producing both goods
C) Mary in producing chairs, John in producing lamps
D) John in producing chairs, Mary in producing lamps
E) Both Mary and John in both goods
54) Huey and Steve can grow potatoes or tomatoes. The table above shows the pounds of
potatoes and tomatoes Huey and Steve can grow in a week. Based on the table, Huey's
opportunity cost of producing one pound of tomatoes is
A) 1.5 pounds of potatoes.
B) 0.66 pound of potatoes.
C) 0, because he has an absolute advantage in it.
D) 0, because he has a comparative advantage in it.
E) 1.0 pound of potatoes.
55) Huey and Steve can grow potatoes or tomatoes. The table above shows the pounds of
potatoes and tomatoes Huey and Steve can grow in a week. Based on the table, Steve has a
comparative advantage in
A) both potatoes and tomatoes.
B) neither potatoes nor tomatoes.
C) potatoes.
D) tomatoes.
E) More information is needed about Huey's comparative advantage in order to determine Steve's
comparative advantage.
56) Huey and Steve can grow potatoes or tomatoes. The table above shows the pounds of
potatoes and tomatoes Huey and Steve can grow in a week. Based on the table, which of the
following statements is correct?
A) Steve has an absolute advantage in both potatoes and tomatoes.
B) Steve has a comparative advantage in both potatoes and tomatoes.
C) Steve has an absolute advantage in potatoes only.
D) Huey has an absolute advantage in potatoes only.
E) Huey has an absolute advantage in both potatoes and tomatoes.
57) "Comparative advantage" is defined as a situation in which one person can produce
A) more of all goods than another person.
B) more of a good than another person.
C) a good for a lower dollar cost than another person.
D) a good for a lower opportunity cost than another person.
E) all goods for lower opportunity costs than another person.
58) Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas
or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Scott's opportunity cost of
producing 1 taco is
A) 1/2 of a pizza.
B) 1 pizza.
C) 2 pizzas.
D) 20 pizzas.
E) 2 tacos.
59) Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas
or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Cindy's opportunity cost of
producing 1 taco is
A) 3/4 of a pizza.
B) 1 pizza.
C) 30 pizzas.
D) 40 pizzas.
E) 1 1/3 of a taco.
60) Scott and Cindy both produce only pizza and tacos. In one hour, Scott can produce 20 pizzas
or 40 tacos. In one hour, Cindy can produce 30 pizzas or 40 tacos. Based on these data,
A) Cindy has a comparative advantage at producing tacos.
B) Scott has a comparative advantage at producing tacos.
C) Cindy and Scott have the same comparative advantage in producing tacos.
D) neither Cindy nor Scott has a comparative advantage in producing tacos.
E) Cindy and Scott have the same comparative advantage in producing pizzas.
