EVALUATED ECONOMIC 1002 EXAM QUESTIONS AND ANSWERS

EVALUATED ECONOMIC 1002 EXAM QUESTIONS AND ANSWERS The benefits of trade include: I. Higher output due to specialization II. Higher output due to comparative advantage III. Increased welfare when preferences differ - CORRECT ANSWER -I, II, and III If instead of specialized doctors (neurologists, cardiologists, gastroenterologists, etc.) we had doctors who each knew the same thing about all aspects of medicine it would be: - CORRECT ANSWER -Worse because total medical knowledge in society would decrease. As trade becomes more widespread, specialization ____, in which turn ____ productivity. - CORRECT ANSWER -increases ; inceeases The ability of one producer to produce one good or service using fewer inputs than another producer is: - CORRECT ANSWER -Absolute advantage A produced has a comparative advantage over the producers if his production of the good involves - CORRECT ANSWER -A lower opportunity cost According to the theory of comparative advantage, a country should specialize in producing a good that involves - CORRECT ANSWER -A lower opportunity cost than that of other countries. The real cost of producing a good is: - CORRECT ANSWER -The opportunity cost of producing the good Figure: PFF Goods X & Y) Refer to the figure. Which of the points representing various consumption possibilities for the country portrayed above is only attainable through foreign trade? - CORRECT ANSWER -Point C (Figure: PFF Nickel & Textiles) Refer to the figure. What is the maximum amount of textiles China can produce? - CORRECT ANSWER -8 tons (Figure: PFF Nickel & Textiles) Refer to the figure. How many tons of text tiles does Australia give up to produce one ton of nickel - CORRECT ANSWER -1/3 (Table: Iphone and Ipod Production) According to the table on iPhone and iPod Production, which of the following is TRUE? - CORRECT ANSWER -The United States has an absolute advantage in producing both Iphones and Ipods. (Table: Iphone and Ipod Production) According to the table on iPhone and iPod Production, the opportunity cost of production one iPhone is: - CORRECT ANSWER -3/4 of one iPod for Canada, and one iPod for the United States. (Table: iPhone and iPod Production) According to the table on iPhone and iPod Production, which of the following is TRUE about Canadian and U.S. comparative advantages? - CORRECT ANSWER -Canada has a comparative advantage in producing iPhones, and the United States has a comparative advantage in producing iPods. (A) Anita is a wonderful baker and can bake 10 cakes in a day, but then has no time left to make cookies. If she bakes only cookies, she can make 200 cookies in a day. John can make equally delicious cakes and cookies but can only make seven cakes or 100 cookies in a day. Based on this information, which of the following statements is true? - CORRECT ANSWER -John has the comparative advantage in the production of cakes.