Chapter 3/Interdependence and the Gains from Trade ❖ 21
67. Refer to Figure 3-1. The rate of tradeoff between producing chairs and producing couches depends on how
many chairs and couches are being produced in
a.
Panel (a).
b.
Panel (b).
c.
both Panel (a) and Panel (b).
Figure 3-2
Peru’s Production Possibilities Frontier
1 2 3 4 5 6 7 8 emeralds
40
80
120
160
200
240
280
320
360
400 rubies
68. Refer to Figure 3-2. The fact that the line slopes downward reflects the fact that
a.
for Peru, it is more costly to produce emeralds than it is to produce rubies.
b.
Peru will produce more emeralds and fewer rubies as time goes by.
c.
Peru faces a tradeoff between producing emeralds and producing rubies.
d.
Peru should specialize in producing rubies.
69. Refer to Figure 3-2. If the production possibilities frontier shown is for 40 hours of production, then how
long does it take Peru to make one emerald?
a.
1/6 hour
b.
1/5 hour
c.
5 hours
d.
6 hours
70. Refer to Figure 3-2. If the production possibilities frontier shown is for 40 hours of production, then how
long does it take Peru to make one ruby?
a.
1/6 hour
b.
1/5 hour
c.
5 hours
d.
6 hours
d.
neither Panel (a) nor Panel (b).
22 ❖ Chapter 3/Interdependence and the Gains from Trade
71. Refer to Figure 3-2. If the production possibilities frontier shown is for one month of production, then which
of the following combinations of emeralds and rubies could Peru produce in a given month?
a.
7 emeralds and 40 rubies
b.
5 emeralds and 92 rubies
c.
3 emeralds and 165 rubies
d.
2 emeralds and 180 rubies
72. Refer to Figure 3-2. If the production possibilities frontier shown is for one month of production, then which
of the following combinations of emeralds and rubies could Peru not produce in a given month?
a.
6 emeralds and 60 rubies
b.
4 emeralds and 120 rubies
c.
3 emeralds and 160 rubies
d.
1 emeralds and 210 rubies
Figure 3-3
Arturo’s Production Possibilities Frontier
Dina’s Production Possibilities Frontier
50 100 150 200 250 300 350 400 tacos
50
100
150
200
250
300
350
400
450
500 burritos
50 100 150 200 250 300 350 400 tacos
50
100
150
200
250
300
350
400
450
500 burritos
73. Refer to Figure 3-3. If Dina must work 0.25 hour to produce each taco, then her production possibilities
frontier is based on how many hours of work?
a.
40 hours
b.
100 hours
c.
400 hours
d.
1600 hours
Chapter 3/Interdependence and the Gains from Trade ❖ 23
74. Refer to Figure 3-3. If the production possibilities frontier shown for Arturo is for 100 hours of production,
then how long does it take Arturo to make one burrito?
a.
1/4 hour
b.
1/3 hour
c.
3 hours
d.
4 hours
75. Refer to Figure 3-3. If Arturo and Dina both spend all of their time producing tacos, then total production is
a.
400 tacos and 0 burritos.
b.
400 tacos and 250 burritos.
c.
800 tacos and 0 burritos.
d.
800 tacos and 500 burritos.
76. Refer to Figure 3-3. If Arturo and Dina each divides his/her time equally between the production of tacos
and burritos, then total production is
a.
200 tacos and 150 burritos.
b.
400 tacos and 250 burritos.
c.
400 tacos and 300 burritos.
d.
800 tacos and 500 burritos.
77. Refer to Figure 3-3. If the production possibilities frontiers shown are each for one day of production, then
which of the following combinations of tacos and burritos could Arturo and Dina together produce in a given
day?
a.
400 tacos and 350 burritos
b.
500 tacos and 250 burritos
c.
600 tacos and 150 burritos
d.
700 tacos and 100 burritos
78. Refer to Figure 3-3. If the production possibilities frontiers shown are each for one day of production, then
which of the following combinations of tacos and burritos could Arturo and Dina together not produce in a
given day?
a.
200 tacos and 400 burritos
b.
300 tacos and 350 burritos
c.
400 tacos and 300 burritos
d.
600 tacos and 250 burritos
24 ❖ Chapter 3/Interdependence and the Gains from Trade
Figure 3-4
Perry’s Production Possibilities Frontier
Jordan’s Production Possibilities Frontier
1 2 3 4 5 6 7 8 novels
2
4
6
8
10
12
14
16
18
20 poems
1 2 3 4 5 6 7 8 novels
2
4
6
8
10
12
14
16
18
20 poems
79. Refer to Figure 3-4. If Jordan must work 3 months to write each novel, then her production possibilities fron-
tier is based on how many months of work?
a.
1 month
b.
3 months
c.
4 months
d.
12 months
80. Refer to Figure 3-4. If the production possibilities frontier shown for Perry is for 6 months of writing, then
how long does it take Perry to write one poem?
a.
1/3 month
b.
1/2 month
c.
2 months
d.
3 months
81. Refer to Figure 3-4. If Perry and Jordan both spend all of their time writing poems, then total production is
a.
3 poems.
b.
6 poems.
c.
12 poems.
d.
24 poems.
82. Refer to Figure 3-4. If Perry and Jordan each divides their time equally between writing novels and writing
poems, then total production is
a.
2 novels and 6 poems.
b.
3 novels and 12 poems.
c.
4 novels and 12 poems.
d.
6 novels and 24 poems.
Chapter 3/Interdependence and the Gains from Trade ❖ 25
83. Refer to Figure 3-4. If the production possibilities frontiers shown are each for one year of writing, then
which of the following combinations of novels and poems could Perry and Jordan together write in a given
year?
a.
1 novel and 22 poems
b.
2 novels and 18 poems
c.
3 novels and 16 poems
d.
5 novels and 8 poems
84. Refer to Figure 3-4. If the production possibilities frontiers shown are each for one year of writing, then
which of the following combinations of novels and poems could Perry and Jordan together not write in a given
year?
a.
1 novel and 21 poems
b.
2 novels and 20 poems
c.
3 novels and 15 poems
d.
5 novels and 6 poems
Figure 3-5
Hosne’s Production Possibilities Frontier
1 2 3 4 5 6 7 8 9 10 purses
1
2
3
4
5
6
7
8
9
10 wallets
1 2 3 4 5 6 7 8 9 10 purses
1
2
3
4
5
6
7
8
9
10 wallets
85. Refer to Figure 3-5. If Hosne must work 0.5 hour to make each purse, then her production possibilities fron-
tier is based on how many hours of work?
a.
2 hours
b.
5 hours
c.
20 hours
d.
50 hours
26 ❖ Chapter 3/Interdependence and the Gains from Trade
86. Refer to Figure 3-5. If the production possibilities frontier shown for Merve is for 8 hours of work, then how
long does it take Merve to make one purse?
a.
1/2 hour
b.
2 hours
c.
4 hours
d.
8 hours
87. Refer to Figure 3-5. If Hosne and Merve both spend all of their time making wallets, then total production is
a.
7 wallets.
b.
8 wallets.
c.
14 wallets.
d.
28 wallets.
88. Refer to Figure 3-5. If Hosne and Merve each divides her time equally between making purses and making
wallets, then total production is
a.
4 purses and 8 wallets.
b.
7 purses and 7 wallets.
c.
10 purses and 6 wallets.
d.
14 purses and 14 wallets.
Figure 3-6
Maxine’s Production Possibilities Frontier
Daisy’s Production Possibilities Frontier
3 6 9 12 15 18 21 24 27 30 pies
2
4
6
8
10
12
14
16
18
20 tarts
3 6 9 12 15 18 21 24 27 30 pies
2
4
6
8
10
12
14
16
18
20
tarts
89. Refer to Figure 3-6. If Daisy must work 2.5 hours to make each pie, then her production possibilities frontier
is based on how many hours of work?
a.
6 hours
b.
7.5 hours
c.
37.5 hours
d.
50 hours
Chapter 3/Interdependence and the Gains from Trade ❖ 27
90. Refer to Figure 3-6. If the production possibilities frontier shown for Maxine is for 3 hours of work, then
how long does it take Maxine to make one pie?
a.
1/4 hour
b.
1/3 hour
c.
3 hours
d.
4 hours
91. Refer to Figure 3-6. If Maxine and Daisy each divides her time equally between making pies and making
tarts, then total production is
a.
6 pies and 10 tarts.
b.
7.5 pies and 3 tarts.
c.
7.5 pies and 10 tarts.
d.
13.5 pies and 13 tarts.
92. Refer to Figure 3-6. If the production possibilities frontiers shown are each for one day of work, then which
of the following combinations of pies and tarts could Maxine and Daisy together not make in a given day?
a.
2 pies and 25 tarts
b.
10 pies and 22 tarts
c.
12 pies and 15 tarts
d.
15 pies and 16 tarts
93. Refer to Figure 3-6. If the production possibilities frontiers shown are each for one day of work, then which
of the following combinations of pies and tarts could Maxine and Daisy together not make in a given day?
a.
2 pies and 25 tarts
b.
10 pies and 22 tarts
c.
12 pies and 15 tarts
d.
15 pies and 16 tarts
28 ❖ Chapter 3/Interdependence and the Gains from Trade
Figure 3-7
Bintu’s Production Possibilities Frontier
Juba’s Production Possibilities Frontier
1 2 3 4 5 6 7 8 bowls
1
2
3
4
5
6
7
8
9
10 cups
1 2 3 4 5 6 7 8 bowls
1
2
3
4
5
6
7
8
9
10 cups
94. Refer to Figure 3-7. If Bintu must work 2 hours to make each cup, then her production possibilities frontier
is based on how many hours of work?
a.
2 hours
b.
4 hours
c.
8 hours
d.
16 hours
95. Refer to Figure 3-7. If the production possibilities frontier shown for Juba is for 2 hours of work, then how
long does it take Juba to make one bowl?
a.
1/8 hour
b.
1/2 hour
c.
2 hours
d.
8 hours
96. Refer to Figure 3-7. If Bintu and Juba both spend all of their time making bowls, then total production is
a.
2 bowls.
b.
3 bowls.
c.
4 bowls.
d.
6 bowls.
97. Refer to Figure 3-7. If Bintu and Juba each divides her time equally between making bowls and making
cups, then total production is
a.
2 bowls and 6 cups.
b.
3 bowls and 7 cups.
c.
4 bowls and 8 cups.
d.
6 bowls and 14 cups.
Chapter 3/Interdependence and the Gains from Trade ❖ 29
98. Refer to Figure 3-7. If the production possibilities frontiers shown are each for 4 hours of work, then which
of the following combinations of bowls and cups could Bintu and Juba together make in a given 4-hour pro-
duction period?
a.
1 bowl and 14 cups
b.
2 bowls and 11 cups
c.
3 bowls and 10 cups
d.
5 bowls and 5 cups
99. Refer to Figure 3-7. If the production possibilities frontiers shown are each for 4 hours of work, then which
of the following combinations of bowls and cups could Bintu and Juba together not make in a given 4-hour
production period?
a.
3 bowls and 9.5 cups
b.
4.5 bowls and 6 cups
c.
5 bowls and 4 cups
d.
6 bowls and 1 cups
Figure 3-8
Chile’s Production Possibilities Frontier
Colombia’s Production Possibilities Frontier
(in pounds)
(in pounds)
2 4 6 8 10 12 14 16 18 20 coffee
2
4
6
8
10
12
14
16
18
20 soybeans
(in pounds)
(in pounds)
2 4 6 8 10 12 14 16 18 20 coffee
2
4
6
8
10
12
14
16
18
20 soybeans
100. Refer to Figure 3-8. If Chile and Colombia each divides its time equally between making coffee and making
soybeans, then total production is
a.
12 pounds of coffee and 12 pounds of soybeans.
b.
14 pounds of coffee and 9 pounds of soybeans.
c.
16 pounds of coffee and 6 pounds of soybeans.
d.
28 pounds of coffee and 18 pounds of soybeans.
30 ❖ Chapter 3/Interdependence and the Gains from Trade
101. Refer to Figure 3-8. If the production possibilities frontiers shown are each for one day of production, then
which of the following combinations of coffee and soybeans could Chile and Colombia together make in a
given day?
a.
4 pounds of coffee and 16 pounds of soybeans
b.
8 pounds of coffee and 15 pounds of soybeans
c.
16 pounds of coffee and 10 pounds of soybeans
d.
24 pounds of coffee and 4 pounds of soybeans
102. Refer to Figure 3-8. If the production possibilities frontiers shown are each for one day of production, then
which of the following combinations of pounds of coffee and pounds of soybeans could Chile and Colombia
together not make in a given day?
a.
4 pounds of coffee and 17 pounds of soybeans
b.
8 pounds of coffee and 14 pounds of soybeans
c.
16 pounds of coffee and 9 pounds of soybeans
d.
24 pounds of coffee and 3 pounds of soybeans
Figure 3-9
Uzbekistan’s Production Possibilities Frontier
Azerbaijan’s Production Possibilities Frontier
510 15 20 25 30 35 40 45 50 bolts
10
20
30
40
50
60
70
80
90
100 nails
510 15 20 25 30 35 40 45 50 bolts
10
20
30
40
50
60
70
80
90
100 nails
103. Refer to Figure 3-9. If Uzbekistan and Azerbaijan each divides its time equally between making bolts and
making nails, then total production is
a.
15 bolts and 40 nails.
b.
25 bolts and 70 nails.
c.
30 bolts and 80 nails.
d.
50 bolts and 140 nails.
Chapter 3/Interdependence and the Gains from Trade ❖ 31
104. Refer to Figure 3-9. If the production possibilities frontiers shown are each for two days of production, then
which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together make in a
given 2-day production period?
a.
12 bolts and 120 nails
b.
24 bolts and 96 nails
c.
38 bolts and 50 nails
d.
44 bolts and 24 nails
105. Refer to Figure 3-9. If the production possibilities frontiers shown are each for two days of production, then
which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together not make in
a given 2-day production period?
a.
9 bolts and 122 nails
b.
21 bolts and 98 nails
c.
36 bolts and 56 nails
d.
47 bolts and 18 nails
Figure 3-10
Alice and Betty’s Production Possibilities in one 8–hour day.
Alice’s Production Possibilities Frontier
Betty’s Production Possibilities Frontier
A
50 100 150 200 250 300 350 400 pizzas
50
100
150
200
250
300
350
400
450
500 lemonade
B (180,180)
50 100 150 200 250 300 350 400 pizzas
50
100
150
200
250
300
350
400
450
500 lemonade
106. Refer to Figure 3-10. Both Alice and Betty
a.
face a constant trade-off between producing pitchers of lemonade and pizzas.
b.
can produce more pizzas than pitchers of lemonade if they devote all of their time to pizza
production.
c.
would benefit from specializing in lemonade production.
d.
would benefit from specializing in pizza production.
32 ❖ Chapter 3/Interdependence and the Gains from Trade
107. Refer to Figure 3-10. If Alice produces only lemonade, she can produce
a.
200 pitchers per day.
b.
300 pitchers per day.
c.
400 pitchers per day.
d.
450 pitchers per day.
108. Refer to Figure 3-10. If point A represents Alice’s production and point B represents Betty’s production,
a.
Alice produces 200 pitchers of lemonade and 100 pizzas while Betty produces 180 pitchers of
lemonade and 180 pizzas.
b.
Alice produces 180 pitchers of lemonade and 180 pizzas while Betty produces 200 pitchers of
lemonade and 100 pizzas.
c.
Alice produces 100 pitchers of lemonade and 200 pizzas while Betty produces 180 pitchers of
lemonade and 180 pizzas.
d.
Only Alice can benefit from specialization and trade.
109. Refer to Figure 3-10. If point A represents Alice’s current production and point B represents Betty’s current
production, under what circumstances can both Alice and Betty benefit from specialization and trade?
a.
Alice produces more pizzas and Betty produces more lemonade.
b.
Alice produces more lemonade and Betty produces more pizzas.
c.
Both Alice and Betty produce only pizzas.
d.
trade.
There are no circumstances under which both Alice and Betty can benefit from specialization and
Figure 3-11
The graph below represents the various combinations of ham and cheese (in pounds) that the nation of
Bonovia could produce in a given month.
(in pounds)
(in pounds)
40 80 120 160 200 240 280 320 360 400 Ham
40
80
120
160
200
240
280
320
360
Cheese
Chapter 3/Interdependence and the Gains from Trade ❖ 33
110. Refer to Figure 3-11. If the production possibilities frontier shown is for 240 hours of production, then how
long does it take Bonovia to make one pound of cheese?
a.
3/5 hour
b.
3/4 hour
c.
4/3 hours
d.
5/3 hours
111. Refer to Figure 3-11. If the production possibilities frontier shown is for 240 hours of production, then which
of the following combinations of ham and cheese could Bonovia produce in 240 hours?
a.
225 pounds of ham and 140 pounds of cheese
b.
280 pounds of ham and 100 pounds of cheese
c.
355 pounds of ham and 80 pounds of cheese
d.
330 pounds of ham and 60 pounds of cheese
112. Refer to Figure 3-11. If the production possibilities frontier shown is for 240 hours of production, then which
of the following combinations of ham and cheese could Bonovia not produce in 240 hours?
a.
250 pounds of ham and 120 pounds of cheese
b.
200 pounds of ham and 160 pounds of cheese
c.
160 pounds of ham and 200 pounds of cheese
d.
100 pounds of ham and 240 pounds of cheese
COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION
1. Assume for the United States that the opportunity cost of each airplane is 100 cars. Which of these pairs of
points could be on the United States’ production possibilities frontier?
a.
(200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars)
b.
(200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars)
c.
(300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars)
d.
(300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)
2. Assume for Namibia that the opportunity cost of each hut is 200 bowls. Which of these pairs of points could
be on Namibia’s production possibilities frontier?
a.
(200 huts, 30,000 bowls) and (150 huts, 35,000 bowls)
b.
(200 huts, 40,000 bowls) and (150 huts, 30,000 bowls)
c.
(300 huts, 50,000 bowl) and (200 huts, 60,000 bowls)
d.
(300 huts, 60,000 bowls) and (200 huts, 80,000 bowls)
34 ❖ Chapter 3/Interdependence and the Gains from Trade
3. What must be given up to obtain an item is called
a.
out–of-pocket cost.
b.
comparative worth.
c.
opportunity cost.
d.
absolute value.
4. The opportunity cost of an item is
a.
the number of hours that one must work in order to buy one unit of the item.
b.
what you give up to get that item.
c.
always less than the dollar value of the item.
d.
always greater than the cost of producing the item.
5. A farmer has the ability to grow either corn or cotton or some combination of the two. Given no other infor-
mation, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a
bushel of cotton
a.
is equal to 0.
b.
is between 0 and 1.
c.
is equal to 1.
d.
is greater than 1.
6. If Korea is capable of producing either shoes or soccer balls or some combination of the two, then
a.
Korea should specialize in the product in which it has an absolute advantage.
b.
it would be impossible for Korea to have an absolute advantage over another country in both
products.
c.
it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the
production of both goods.
d.
Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls.
7. Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn
to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is
a.
0.36 bushel of corn.
b.
2.8 bushels of corn.
c.
14 bushels of corn.
d.
70 bushels of corn.
Chapter 3/Interdependence and the Gains from Trade ❖ 35
8. Suppose a gardener produces both green beans and corn in her garden. If the opportunity cost of one bushel of
corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is
a.
3/5 bushel of corn.
b.
5/3 bushels of corn.
c.
3 bushels of corn.
d.
5 bushels of corn.
9. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 ta-
bles or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost
of 1 chair is
a.
1/5 table for Mike and 1/3 table for Sandy.
b.
1/5 table for Mike and 3 tables for Sandy.
c.
5 tables for Mike and 1/3 table for Sandy.
d.
5 tables for Mike and 3 tables for Sandy.
10. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 ta-
bles or 20 chairs, where Sandy can make 6 tables or 18 chairs. Given this, we know that the opportunity cost
of 1 table is
a.
1/5 chair for Mike and 1/3 chair for Sandy.
b.
1/5 chair for Mike and 3 chairs for Sandy.
c.
5 chairs for Mike and 1/3 chair for Sandy.
d.
5 chairs for Mike and 3 chairs for Sandy.
11. If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If
he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that
a.
if he devotes all of his available resources to watermelon production, then he can produce 80
watermelons.
b.
he cannot have a comparative advantage over other farmers in producing cantaloupes.
c.
his opportunity cost of one watermelon is 2/3 of a cantaloupe.
d.
his production possibilities frontier is bowed-out.
12. Absolute advantage is found by comparing different producers’
a.
opportunity costs.
b.
payments to land, labor, and capital.
c.
input requirements per unit of output.
d.
locational and logistical circumstances.
36 ❖ Chapter 3/Interdependence and the Gains from Trade
13. 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,
a.
has a low opportunity cost of producing that good, relative to the opportunity costs of other
producers.
b.
has a comparative advantage in the production of that good.
c.
has an absolute advantage in the production of that good.
d.
should be the only producer of that good.
14. If Shawn can produce more donuts in one day than Sue can produce in one day, then
a.
Shawn has a comparative advantage in the production of donuts.
b.
Sue has a comparative advantage in the production of donuts.
c.
Shawn has an absolute advantage in the production of donuts.
d.
Sue has an absolute advantage in the production of donuts.
15. Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 ta-
bles or 20 chairs, while Sandy can make 6 tables or 18 chairs. Given this, we know that
a.
Mike has an absolute advantage in chairs.
b.
Mike has a comparative advantage in tables.
c.
Sandy has an absolute advantage in chairs.
d.
Sandy has a comparative advantage in chairs.
16. Travis can mow a lawn in two hours or he can trim a tree in one hour. Ricardo can mow a lawn in three hours
or he can trim a tree in two hours.
a.
Travis has an absolute advantage over Ricardo in trimming trees.
b.
Travis has a comparative advantage over Ricardo in mowing lawns.
c.
Ricardo has a comparative advantage over Travis in trimming trees.
d.
All of the above are correct.
17. Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two win-
dows per hour or he can iron five shirts per hour.
a.
Susan has an absolute advantage over Paul in washing windows.
b.
Susan has a comparative advantage over Paul in washing windows.
c.
Paul has a comparative advantage over Susan in ironing shirts.
d.
All of the above are correct.
Chapter 3/Interdependence and the Gains from Trade ❖ 37
18. Suppose Jim and Tom can both produce two goods: baseball bats and hockey sticks. Which of the following
is not possible?
a.
Jim has an absolute advantage in the production of baseball bats and in the production of hockey
sticks.
b.
Jim has an absolute advantage in the production of baseball bats and a comparative advantage in the
production of hockey sticks.
c.
Jim has an absolute advantage in the production of hockey sticks and a comparative advantage in
the production of baseball bats.
d.
Jim has a comparative advantage in the production of baseball bats and in the production of hockey
sticks.
19. Kelly and David are both capable of repairing cars and cooking meals. Which of the following scenarios is
not possible?
a.
Kelly has a comparative advantage in repairing cars and David has a comparative advantage in
cooking meals.
b.
Kelly has an absolute advantage in repairing cars and David has an absolute advantage in cooking
meals.
c.
Kelly has a comparative advantage in repairing cars and in cooking meals.
d.
David has an absolute advantage in repairing cars and in cooking meals.
20. Suppose Jim and Tom can both produce baseball bats. If Jim’s opportunity cost of producing baseball bats is
lower than Tom’s opportunity cost of producing baseball bats, then
a.
Tom must have an absolute advantage in the production of baseball bats.
b.
Jim must have an absolute advantage in the production of baseball bats.
c.
Tom has a comparative advantage in the production of baseball bats.
d.
Jim has a comparative advantage in the production of baseball bats.
21. If Shawn can produce donuts at a lower opportunity cost than Sue, then
a.
Shawn has a comparative advantage in the production of donuts.
b.
Sue has a comparative advantage in the production of donuts.
c.
Shawn should not produce donuts.
d.
Shawn is capable of producing more donuts than Sue in a given amount of time.
22. If Iowa’s opportunity cost of corn is lower than Oklahoma’s opportunity cost of corn, then
a.
Iowa has a comparative advantage in the production of corn.
b.
Iowa has an absolute advantage in the production of corn.
c.
Iowa should import corn from Oklahoma.
d.
Oklahoma should produce just enough corn to satisfy its own residents’ demands.
38 ❖ Chapter 3/Interdependence and the Gains from Trade
23. Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative ad-
vantage in producing wheat if
a.
Canada requires fewer resources than the U.S. to produce a bushel of wheat.
b.
the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the U.S.
c.
the opportunity cost of producing a bushel of wheat is lower for the U.S. than it is for Canada.
d.
the U.S. has an absolute advantage over Canada in producing computer software.
24. Both Bill and Mary produce t-shirts and hats. If Bill’s opportunity cost of 1 t–shirt is 4 hats and Mary’s oppor-
tunity cost of 1 t-shirt is 3 hats, then
a.
Bill has a comparative advantage in the production of t-shirts.
b.
Mary has a comparative advantage in the production of t–shirts.
c.
Mary has a comparative advantage in the production of hats.
d.
Bill has a comparative advantage in the production of both t-shirts and hats.
25. Comparative advantage is related most closely to which of the following?
a.
output per hour
b.
opportunity cost
c.
efficiency
d.
bargaining strength in international trade
26. When describing the opportunity cost of two producers, economists use the term
a.
natural advantage.
b.
trading advantage.
c.
comparative advantage.
d.
absolute advantage.
27. For two individuals who engage in the same two productive activities, it is impossible for one of the two indi-
viduals to
a.
have a comparative advantage in both activities.
b.
have an absolute advantage in both activities.
c.
be more productive per unit of time in both activities.
d.
gain from trade with each other.
Chapter 3/Interdependence and the Gains from Trade ❖ 39
28. Two individuals engage in the same two productive activities. In which of the following circumstances would
neither individual have a comparative advantage in either activity?
a.
One individual’s production possibilities frontier is steeper than the other individual’s production
possibilities frontier.
b.
One individual is faster at both activities than the other individual.
c.
One individual’s opportunity costs are the same as the other individual’s opportunity costs.
d.
None of the above is correct; one of the two individuals always will have a comparative advantage
in at least one of the two activities.
29. Which of the following statements about comparative advantage is not true?
a.
Comparative advantage is determined by which person or group of persons can produce a given
quantity of a good using the fewest resources.
b.
The principle of comparative advantage applies to countries as well as to individuals.
c.
Economists use the principle of comparative advantage to emphasize the potential benefits of free
trade.
d.
A country may have a comparative advantage in producing a good, even though it lacks an absolute
advantage in producing that good.
30. The principle of comparative advantage does not provide answers to certain questions. One of those questions
is
a.
Do specialization and trade benefit more than one party to a trade?
b.
Is it absolute advantage or comparative advantage that really matters?
c.
How are the gains from trade shared among the parties to a trade?
d.
Is it possible for specialization and trade to increase total output of traded goods?
31. The principle of comparative advantage does not provide answers to certain questions. One of those questions
is
a.
Is it possible for specialization and trade to benefit more than one party to a trade?
b.
Is it possible for specialization and trade to increase total output of traded goods?
c.
Do opportunity costs play a role in people’s decisions to specialize in certain activities?
d.
What determines the price at which trade takes place?
32. Which of the following is not correct?
a.
The producer who requires a smaller quantity of inputs to produce a good is said to have an
absolute advantage in producing that good.
b.
The producer who gives up less of other goods to produce Good X has the smaller opportunity cost
of producing Good X.
c.
The producer who has the smaller opportunity cost of producing a good is said to have a
comparative advantage in producing that good.
d.
The gains from specialization and trade are based not on comparative advantage but on absolute
advantage.
40 ❖ Chapter 3/Interdependence and the Gains from Trade
33. Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a
worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in
Cornland and 20 workers in Oatland. Which of the following statements is true?
a.
Both countries could gain from trade with each other.
b.
Neither country could gain from trade with each other because Cornland has an absolute advantage
in both goods.
c.
Neither country could gain from trade with each other because neither one has a comparative
advantage.
d.
Oatland could gain from trade between the two countries, but Cornland definitively would lose.
34. Suppose that the country of Xenophobia chose to isolate itself from the rest of the world. Its ruler proclaimed
that Xenophobia should become self-sufficient, so it would not engage in foreign trade. From an economic
perspective, this idea would
a.
make sense if Xenophobia had an absolute advantage in all goods.
b.
make sense if Xenophobia had no absolute advantages in any good.
c.
not make sense as long as Xenophobia had a comparative advantage in some good.
d.
not make sense as long as Xenophobia had an absolute advantage in at least half the goods that
could be traded.
35. Specialization and trade are closely linked to
a.
absolute advantage.
b.
comparative advantage.
c.
gains to some traders that exactly offset losses to other traders.
d.
shrinkage of the economic pie.
36. When each person specializes in producing the good in which he or she has a comparative advantage, total
production in the economy
a.
falls.
b.
stays the same.
c.
rises.
d.
may fall, rise, or stay the same.
37. Total output in an economy increases when each person specializes because
a.
there is less competition for the same resources.
b.
each person spends more time producing that product in which he or she has a comparative
advantage.
c.
a wider variety of products will be produced within each country due to specialization.
d.
government necessarily plays a larger role in the economy due to specialization.