18.1 Benefits from Specialization and Trade
1) The opportunity cost of something is:
A) a measure of the scarcity of the good.
B) what you sacrifice to get the good.
C) the price you pay for the good.
D) what you are willing to pay for the good.
2) The production possibilities curve represents the set of all:
A) feasible combinations of goods that the economy can produce given that a nation’s resources are fully employed.
B) factors of production that can be used to manufacture goods and services.
C) combinations of goods and services that can be used in the production of other goods and services.
D) nonlinear forms of production in the economy.
3) If the tradeoff between the two goods is constant, the production possibilities curve is:
A) a negatively-sloped straight line.
B) a positively-sloped straight line.
C) a negatively-sloped curve which is bowed outward.
D) a negatively-sloped curve which is bowed inward.
4) The slope of the production possibilities curve is:
B) positive and increasing.
C) positive and decreasing.
D) the opportunity cost of one good in terms of the other.
5) Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If Arcadia produces only teapots, it can make 80 per day. If Arcadia produces only surfboards, it can make 30 per day. What is the opportunity cost of 1 teapot in Arcadia?
A) 3/8 of a surfboard
B) 8/3 surfboards
C) 30 surfboards
D) 80 surfboards
6) Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If Arcadia produces only teapots, it can make 40 per day. If Arcadia produces only surfboards, it can make 60 per day. What is the opportunity cost of 1 teapot in Arcadia?
A) 2/3 of a surfboard
B) 1.5 surfboards
C) 40 surfboards
D) 60 surfboards
7) For a nation to have ________ in producing a good it must have a lower opportunity cost of producing that good than the other country.
A) a comparative advantage
B) an absolute advantage
C) an autarky advantage
D) both a comparative advantage and an absolute advantage
8) The relative amounts of the goods that will be exchanged for each other in trade refers to the nations’:
A) absolute advantages.
B) terms of trade.
C) production possibilities.
D) autarky status.
9) If Italy can produce grapes at a lower opportunity cost than any other nation, Italy is said to have a(n) ________ in the production of grapes.
B) absolute advantage
C) comparative disadvantage
D) comparative advantage
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