3.4 Specialization and Trade
1) If Wendy can produce more of all goods than Tommy in an hour, 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.
2) 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.
3) 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.
4) 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
5) 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.
6) 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.
7) Hank requires 1 hour to cut the grass and 3 hours to clean the house. His sister Holly requires 1 hour to cut the grass and 4 hours to clean the house. Which of the following statements is true?
A) Hank has a comparative advantage in both cutting the grass and cleaning the house.
B) Hank and Holly both have a comparative advantage in cutting the grass.
C) Hank has a lower opportunity cost of cutting the grass.
D) Hank has an absolute advantage in both cutting the grass and cleaning the house.
E) Holly has a comparative advantage in cutting the grass.
8) The United States can use all its resources to produce 250 DVDs or 500 shoes. China can use all of its resources to produce 30 DVDs or 300 shoes. The opportunity cost of producing a DVD in the United States is
A) 2 shoes.
B) 1/2 of a shoe.
C) 20 shoes.
D) 500 shoes.
E) 1 DVD.
9) In the table above, how many jackets must Mary forgo for every dress she makes?
A) 12 jackets
B) 3/4 of a jacket
C) 2/3 of a jacket
D) 1 1/2 jackets
E) 8 jackets
10) In the table above, how many jackets must Mark forgo for every dress he makes?
A) 1 jacket
B) 16 jackets
C) 2/3 of a jacket
D) 1 1/2 jackets
E) 24 dresses
11) In the above table, for Mary the opportunity cost of producing a dress is ________ and the opportunity cost for Mark of producing a dress is ________.
A) 1 1/2 jackets; 2/3 of a jacket
B) 1 1/2 jackets; 2 1/2 jackets
C) 1 1/4 jackets; 1/2 of a jacket
D) 1 jacket; 1 jacket
E) 1 dress; 1 dress
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