Question 1

Assume that Columbia can produce 1,000 pounds of coffee in one day or produce 200 pounds of bananas in one day.In addition, assume that Ecuador can produce 300 pounds of coffee in one day or produce 100 pounds of bananas in one day.Which country has the comparative advantage in coffee and which has the comparative advantage in bananas? Determine a pattern of trade regarding these countries and these goods that would benefit both countries.

Accepted Answer

The answer of Assume that Columbia can produce 1,000 pounds...

Question 2

If race-car driving is dangerous, why would any rational person choose to be a race-car driver?

Accepted Answer

The answer of If race-car driving is dangerous, why would...

Question 3

Tom is a castaway who washes up on a remote island.He can kill eight birds per hour or catch ten fish per day.The natives on the island can kill ten birds per day or catch twenty fish per day.The natives have a comparative advantage in:

Accepted Answer

The natives have a comparative advantage in fishing since they can catch 20 fish per day, while Tom can catch only 10 per day. Even though Tom can kill more birds per hour than the natives, the comparison should be made in terms of the opportunity cost of each activity, which is the amount of fish he would have caught instead of killing birds. Therefore, Tom should focus on fishing, where he has a comparative disadvantage but a lower opportunity cost, and leave the hunting of birds to the natives, who have a comparative advantage in that activity.

Question 4

Advantages of specialization do not include:

Accepted Answer

Reduced interdependence is not an advantage of specialization. In fact, it increases interdependence as different individuals or firms rely on each other for goods and services.

Question 5

Why do people generally switch channels when a movie's final credits are being displayed?

Accepted Answer

The answer of Why do people generally switch channels when...

Question 6

If a country wanted to maximize the value of its output, each job should be carried out by the person who:

Accepted Answer

The person who has a comparative advantage in that activity should carry out the job in order to maximize the value of the output. This person can produce the good or service at a lower opportunity cost, which means they sacrifice less to produce it compared to others. This results in a more efficient use of resources and ultimately leads to increased output and prosperity for the country.

Question 7

Would it make good sense for a community to seek to reduce its levels of pollution to zero? Why or why not?

Accepted Answer

The answer of Would it make good sense for a...

Question 8

Farmer Fred could grow wheat and barley.He could grow 75 bushels of wheat or 125 bushels of barley using the same resources on an acre of his land.The price of wheat is $2.00 per bushel and the price of barley $ 0.80.Show the benefits to Fred from specialization.What should he specialize in?

Accepted Answer

The answer of Farmer Fred could grow wheat and barley.He...

Question 9

If resources and goods are free to move across states, if Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that:

Accepted Answer

If resources and goods are free to move across states, producers will choose to specialize in the production of goods for which they have a comparative advantage, which is determined by identifying the goods with lower opportunity costs. In this scenario, California producers specialize in growing almonds because they have a lower opportunity cost of producing almonds than Oregon. Similarly, Oregon producers specialize in producing honey because they have a lower opportunity cost of producing honey than California. Therefore, all of the above are true, and the answer is E.

Question 10

Two parties can capture gains from specialization and trade whenever:

Accepted Answer

Specialization and trade are beneficial when parties have different opportunity costs for producing goods, allowing them to trade based on comparative advantage.

Question 11

Tom is a castaway who washes up on a remote island.He can kill eight birds per hour or catch ten fish per day.The natives on the island can kill ten birds per day or catch twenty fish per day.According to comparative advantage,

Accepted Answer

Tom has a comparative advantage in killing birds, while the natives have a comparative advantage in catching fish. Therefore, Tom should specialize in killing birds and trade them to the natives for fish.

Question 12

Which of the following is true?

Accepted Answer

All of the statements are true. 
A) People specialize in activities in which they have a comparative advantage because they can produce more efficiently and at a lower opportunity cost, leading to greater productivity and output. 
B) Pursuing comparative advantage is in people's self-interest because it allows them to produce at a lower cost or with a higher level of productivity, leading to greater income and prosperity. 
C) Specialization leads to increased skills and knowledge in a particular area due to the repetition of that activity. 
D) The concept of comparative advantage is the foundation of international trade theory, explaining why countries specialize in certain goods or services and engage in trade.

Question 13

Maggie is a potter and she likes to dig her own clay for producing pots, cups and other ceramic items.She is aware of two places where she can obtain the right clay for her work.The first field is quite close, just at the edge of town.The second field is 15 miles away and (since there are no access roads) requires a half-day of travel just to get there.Compare the opportunity cost of producing pots using clay from each of these fields.

Accepted Answer

The answer of Maggie is a potter and she likes...

Question 14

Explain why each of the following is considered an economic issue:
a.whether to spend Saturday afternoon at a football game
b.obtaining tickets to a U2 concert
c.your university considers your application for one of 25 available scholarships

Accepted Answer

The answer of Explain why each of the following is...

Question 15

Which of the following is not true?

Accepted Answer

The statement "What one trader gains from a trade, the other must lose" is not true. Voluntary exchange can be mutually beneficial, where both parties gain from the exchange.

Question 16

Tom is a castaway who washes up on a remote island.He can kill eight birds per hour or catch ten fish per day.The natives on the island can kill ten birds per day or catch twenty fish per day.Tom has a comparative advantage in:

Accepted Answer

Tom has a comparative advantage in hunting birds because he can kill more birds per hour (8 birds) compared to the natives' daily rate (10 birds), indicating he is relatively more efficient at hunting birds than fishing, where his rate is lower than the natives' (10 fish per day compared to their 20 fish per day). Comparative advantage is determined by who has the lower opportunity cost in production, and in this scenario, Tom's skills make him more efficient at bird hunting relative to fishing when compared to the natives.

Question 17

Which of the following is true?

Accepted Answer

All the given options are true. Voluntary trades give both parties more in value than what they give up, promoting specialization in areas of comparative advantage, which results in increased productivity and wealth.

Question 18

Table 2-A
 $\begin{array} { c c c } 
\text { Possibility A } & \text { Econamics } & \text { History } \
\text { I } & 94 & 76 \
\text { II } & 87 & 84 \
\text { III } & 77 & 9 !
\end{array}$
-Refer to Table 2-A.A student has only a few hours to prepare for two different exams this afternoon.The above table shows alternative possible exam scores with three alternative uses of the student's time.The opportunity cost of scoring a 94 on the economics exam rather than a 77 is:

Accepted Answer

The opportunity cost of scoring 94 in economics instead of 77 is the difference in history scores between Possibility I and III, which is 84 - 9 = 15 points.

Question 19

Table 2-A
 $\begin{array} { c c c } 
\text { Possibility A } & \text { Econamics } & \text { History } \
\text { I } & 94 & 76 \
\text { II } & 87 & 84 \
\text { III } & 77 & 9 !
\end{array}$
-Refer to Table 2-A.A student has only a few hours to prepare for two different exams tomorrow morning.The above table shows alternative possible exam outcomes with three alternative uses of the student's time.The opportunity cost of scoring an 84 on the history exam rather than 76 is:

Accepted Answer

The opportunity cost of scoring an 84 on the history exam instead of 76 is the difference in economics scores between Possibility II (87) and Possibility I (94), which is 7 points.

Question 20

To obtain the greatest gains from trade, a country should specialize in and ____ those goods for which it has a comparative advantage and ____ those goods for which other countries have a comparative advantage.

Accepted Answer

A country should specialize in producing and exporting goods for which it has a comparative advantage (i.e. goods that it can produce at a lower opportunity cost than other countries) and import goods for which other countries have a comparative advantage. This allows for a more efficient allocation of resources and results in higher overall gains from trade. Therefore, the best choice is to export goods for which the country has a comparative advantage and import goods for which other countries have a comparative advantage.

Quiz 2: The Economic Way of Thinking

If race-car driving is dangerous, why would any rational person choose to be a race-car driver?

Tom is a castaway who washes up on a remote island.He can kill eight birds per hour or catch ten fish per day.The natives on the island can kill ten birds per day or catch twenty fish per day.The natives have a comparative advantage in:

Advantages of specialization do not include:

Why do people generally switch channels when a movie's final credits are being displayed?

If a country wanted to maximize the value of its output, each job should be carried out by the person who:

Would it make good sense for a community to seek to reduce its levels of pollution to zero? Why or why not?

Farmer Fred could grow wheat and barley.He could grow 75 bushels of wheat or 125 bushels of barley using the same resources on an acre of his land.The price of wheat is $2.00 per bushel and the price of barley $ 0.80.Show the benefits to Fred from specialization.What should he specialize in?

If resources and goods are free to move across states, if Oregon producers choose to specialize in producing honey and California producers choose to specialize in growing almonds, then we could reasonable conclude that:

Two parties can capture gains from specialization and trade whenever:

Tom is a castaway who washes up on a remote island.He can kill eight birds per hour or catch ten fish per day.The natives on the island can kill ten birds per day or catch twenty fish per day.According to comparative advantage,

Which of the following is true?

Explain why each of the following is considered an economic issue: a.whether to spend Saturday afternoon at a football game b.obtaining tickets to a U2 concert c.your university considers your application for one of 25 available scholarships

Which of the following is not true?

Tom is a castaway who washes up on a remote island.He can kill eight birds per hour or catch ten fish per day.The natives on the island can kill ten birds per day or catch twenty fish per day.Tom has a comparative advantage in:

Which of the following is true?

To obtain the greatest gains from trade, a country should specialize in and those goods for which it has a comparative advantage and those goods for which other countries have a comparative advantage.