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. (B) 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 -Anita should bake cookies and John should bake cakes. (Table: Production Possibilities for the United States and Mexico) According to the table on Production Possibilities for the United States and Mexico, Mexico has an absolute advantage in ________ and a comparative advantage in _________. - CORRECT ANSWER -Neither good, corn (Table: Production Possibilities for the United States and Mexico) According to the table on Production Possibilities for the United States and Mexico, the United States has an absolute advantage in ________ and a comparative advantage in _________. - CORRECT ANSWER -Both goods, potatoes (Table: Production Possibilities for the United States and Mexico) According to the table on Production Possibilities for the United States and Mexico, Mexico's opportunity cost of producing each ton of potatoes is ______, while the United States' opportunity cost of producing each ton of potatoes is ______. - CORRECT ANSWER -Eight tons of corn; five tons of corn Trade tends to - CORRECT ANSWER -increase wages in all countries The trade networks of the Roman empire - CORRECT ANSWER -fell apart in the Medieval era, leading to the Dark Ages. Which of the following is NOT an outcome of trade? - CORRECT ANSWER -People in poor countries are made worse off. David sells his car, which he considers worthless, to Cameron for $200. Which of the following statement is true? - CORRECT ANSWER -David and Cameron must have different preferences for the car.