Chapter 3

Interdependence and the Gains from Trade

MULTIPLE CHOICE

1
. People who provide you with goods and services
a. are acting out of generosity.
b. are acting because they like you.
c. are required to do so by government.
d. do so because they get something in return.
ANSWER: d. do so because they get something in return.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

2
. A rancher can produce only hamburgers, and a farmer can produce only french fries. The rancher
and the farmer both like both foods. They
a. cannot gain from trade.
b. could gain from trade under certain circumstances, but not always.
c. could gain from trade because each would enjoy a greater variety of food.
d. could gain from trade only if each were indifferent between hamburgers and french fries.
ANSWER: c. could gain from trade because each would enjoy a greater variety of food.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

3
. Without trade
a. a country is better off.
b. a country’s production possibilities frontier is also its consumption possibilities frontier.
c. a country can still benefit from international specialization.
d. more product variety is available in a country.
ANSWER: b. a country’s production possibilities frontier is also its consumption possibilities frontier.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

4
. A country’s consumption possibilities frontier can be outside its production possibilities frontier

1 ANSWER: d. do so because they get something in return.

TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

2 ANSWER: c. could gain from trade because each would enjoy a greater variety of food.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

3 ANSWER: b. a country’s production possibilities frontier is also its consumption possibilities

frontier.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

4 ANSWER: a. with trade.

TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

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2 Chapter 3/Interdependence and the Gains from Trade

a. with trade.
b. by allocating resources differently.
c. by producing a greater variety of goods and services.
d. by lowering unemploymenit in the country.
ANSWER: a. with trade.
TYPE: M KEY1: D SECTION: 1 OBJECTIVE: 1 RANDOM: Y

5
. Which of the following is NOT correct?
a. Trade allows for specialization.
b. Trade is good for nations.
c. Trade is based on absolute advantage.
d. Trade allows individuals to consume outside of their individual production possibilities curve.
ANSWER: c. Trade is based on absolute advantage.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 1 RANDOM: Y

6
. If labor in Mexico is less productive than labor in the U.S. in all areas of production,
a. neither nation can benefit from trade.
b. Mexico can benefit from trade but the U.S. cannot.
c. Mexico will not have a comparative advantage in any good.
d. both nations can benefit from trade.
ANSWER: d. both nations can benefit from trade.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 1 RANDOM: Y

Labor Hours Needed to Make 1 Pound of:

Pounds produced in 20 hours:
Meat Potatoes Meat Potatoes
Farmer 10 5 2 4
Rancher 4 1 5 20

7
. Refer to the tables shown. For the Farmer, the opportunity cost of 1 pound of meat is

5 ANSWER: c. Trade is based on absolute advantage.

TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 1 RANDOM: Y

6 ANSWER: d. both nations can benefit from trade.

TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 1 RANDOM: Y

7 ANSWER: c. 2 pounds of potatoes.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

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 Chapter 3/Interdependence and the Gains from Trade 3

a. 8 hours of labor.
b. 4 hours of labor.
c. 2 pounds of potatoes.
d. 1/2 pound of potatoes.
ANSWER: c. 2 pounds of potatoes.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

8
. Refer to the tables shown. For the Rancher, the opportunity cost of 1 pound of meat is
a. 5 hours of labor.
b. 1 hour of labor.
c. 1/4 pound of potatoes.
d. 4 pounds of potatoes.
ANSWER: d. 4 pounds of potatoes.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

9
. Refer to the tables shown. For the Farmer, the opportunity cost of 1 pound of potatoes is
a. 8 hours of labor.
b. 4 hours of labor.
c. 2 pounds of meat.
d. 1/2 pound of meat.
ANSWER: d. 1/2 pound of meat.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

10
. Refer to the tables shown. For the Rancher, the opportunity cost of 1 pound of potatoes is
a. 4 hours of labor.
b. 2 hours of labor.
c. 1/4 pound of meat.
d. 4 pounds of meat.
ANSWER: c. 1/4 pound of meat.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

11
. Refer to the tables shown. The Farmer has an absolute advantage in __________ and the Rancher has
an absolute advantage in __________.

8 ANSWER: d. 4 pounds of potatoes.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

9 ANSWER: d. 1/2 pound of meat.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

10 ANSWER: c. 1/4 pound of meat.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

11 ANSWER: d. neither good, both goods

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

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4 Chapter 3/Interdependence and the Gains from Trade

a. meat, potatoes
b. potatoes, meat
c. meat, meat
d. neither good, both goods
ANSWER: d. neither good, both goods
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

12
. Refer to the tables shown. The Rancher has an absolute advantage in __________ and the Farmer has
a comparative advantage in __________.
a. both goods, meat
b. meat, potatoes
c. meat, neither good
d. both goods, potatoes
ANSWER: a. both goods, meat
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

13
. Refer to the tables shown. The Farmer has an absolute advantage in __________ and the Rancher has
a comparative advantage in __________.
a. meat, meat
b. potatoes, potatoes
c. neither good, potatoes
d. neither good, meat
ANSWER: c. neither good, potatoes
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

14
. Refer to the tables shown. The Rancher has a comparative advantage in __________ and the Farmer
has a comparative advantage in __________.
a. potatoes, meat
b. both goods, neither good
c. meat, potatoes
d. neither good, both goods
ANSWER: a. potatoes, meat
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

12 ANSWER: a. both goods, meat

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

13 ANSWER: c. neither good, potatoes

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

14 ANSWER: a. potatoes, meat

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 1 RANDOM: Y

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 Chapter 3/Interdependence and the Gains from Trade 5

15
. Refer to the tables shown. The Farmer and Rancher both could benefit by the Farmer specializing in
__________ and the Rancher specializing in ___________.
a. meat, potatoes
b. potatoes, meat
c. neither good, meat
d. They cannot benefit by specialization and trade.
ANSWER: a. meat, potatoes
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 3 INSTRUCTION: 1 RANDOM: Y

These figures illustrate the production possibilities frontiers for Robinson Crusoe and Friday with 12
hours of labor.

16
. Refer to the graphs given. For Robinson Crusoe the opportunity cost of 1 pound of fish is
a. 2 pounds of coconuts.
b. 1/2 pound of coconuts.
c. 4 pounds of coconuts.
d. 1/4 pound of coconuts.
ANSWER: c. 4 pounds of coconuts.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

17
. Refer to the graphs given. For Friday the opportunity cost of 1 pound of fish is

15 ANSWER: a. meat, potatoes

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 3 INSTRUCTION: 1 RANDOM: Y

16 ANSWER: c. 4 pounds of coconuts.

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

17 ANSWER: b. 3/2 pounds of coconuts.

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

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6 Chapter 3/Interdependence and the Gains from Trade

a. 1 pound of coconuts.
b. 3/2 pounds of coconuts.
c. 1/3 pound of coconuts.
d. 2 pounds of fish.
ANSWER: b. 3/2 pounds of coconuts.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

18
. Refer to the graphs given. For Robinson Crusoe the opportunity cost of 1 pound of coconuts is
a. 2 pounds of fish.
b. 1/2 pound of fish.
c. 4 pounds of fish.
d. 1/4 pound of fish.
ANSWER: d. 1/4 pound of fish.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

19
. Refer to the graphs given. For Friday the opportunity cost of 1 pound of coconuts is
a. 2/3 pound of fish.
b. 3 pounds of fish.
c. 1 pound of fish.
d. 2 pounds of fish.
ANSWER: a. 2/3 pound of fish.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

20
. Refer to the graphs given. Robinson Crusoe has a comparative advantage in __________ and Friday
has a comparative advantage in ___________.
a. fish, coconuts
b. coconuts, fish
c. fish, fish
d. fish, neither good
ANSWER: b. coconuts, fish
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

18 ANSWER: d. 1/4 pound of fish.

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

19 ANSWER: a. 2/3 pound of fish.

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

20 ANSWER: b. coconuts, fish

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

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 Chapter 3/Interdependence and the Gains from Trade 7

21
. Refer to the graphs given. Robinson Crusoe has an absolute advantage in __________ and Friday has
an absolute advantage in __________.
a. fish, coconuts
b. coconuts, fish
c. neither good, both goods
d. both goods, neither good
ANSWER: b. coconuts, fish
TYPE: MKEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

22
. Refer to the graphs given. Robinson Crusoe has a comparative advantage in __________ and Friday
has an absolute advantage in __________.
a. fish, both goods
b. fish, coconuts
c. fish, neither good
d. coconuts, fish
ANSWER: d. coconuts, fish
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

23
. Refer to the graphs given. Robinson Crusoe has an absolute advantage in __________ and Friday has
a comparative advantage in __________.
a. coconuts, fish
b. both goods, coconuts
c. fish, coconuts
d. neither good, fish
ANSWER: a. coconuts, fish
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

21 ANSWER: b. coconuts, fish

TYPE: MKEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

22 ANSWER: d. coconuts, fish

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

23 ANSWER: a. coconuts, fish

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 2 GRAPH FORMAT: M QUESTION INSTRUCTION: 2
RANDOM: N

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8 Chapter 3/Interdependence and the Gains from Trade

For the following question(s), use the accompanying table.

Labor Hours needed to make one unit of: Amount produced in 120 hours:
Perfume Cloth Perfume Cloth
(bottles)(yards)(bottles) (yards)
Nancy 6 8 20 15
Roger 5 10 24 12

24
. Refer to the tables shown. The opportunity cost of 1 bottle of perfume for Nancy is
a. 4/3 yards of cloth.
b. 3/4 yard of cloth.
c. 1 yard of cloth.
d. 1/4 yard of cloth.
ANSWER: b. 3/4 yard of cloth.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

25
. Refer to the tables shown. The opportunity cost of 1 bottle of perfume for Roger is
a. 3 yards of cloth.
b. 2 yards of cloth.
c. 1/3 yard of cloth.
d. 1/2 yard of cloth.
ANSWER: d. 1/2 yard of cloth.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

26
. Refer to the tables shown. For Nancy the opportunity cost of 1 yard of cloth is
a. 4/3 bottles of perfume.
b. 1 bottle of perfume.
c. 3/4 bottle of perfume.
d. 1/3 bottle of perfume.
ANSWER: a. 4/3 bottles of perfume.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

24 ANSWER: b. 3/4 yard of cloth.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

25 ANSWER: d. 1/2 yard of cloth.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

26 ANSWER: a. 4/3 bottles of perfume.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

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 Chapter 3/Interdependence and the Gains from Trade 9

27
. Refer to the tables shown. For Roger the opportunity cost of 1 yard of cloth is
a. 2 bottles of perfume.
b. 1 bottle of perfume.
c. 1/2 bottle of perfume.
d. 1/4 bottle of perfume.
ANSWER: a. 2 bottles of perfume.
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

28
. Refer to the tables shown. Nancy has a comparative advantage in __________ and Roger has an
absolute advantage in __________.
a. perfume, cloth
b. perfume, both goods
c. cloth, both goods
d. cloth, perfume
ANSWER: d. cloth, perfume
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

29
. Refer to the tables shown. Nancy has an absolute advantage in __________________ and Roger has a
comparative advantage in _______________.
a. cloth, perfume
b. perfume, cloth
c. perfume, neither good
d. cloth, cloth
ANSWER: a. cloth, perfume
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

30
. Refer to the tables shown. Nancy has an absolute advantage in _______________ and Roger has an
absolute advantage in ________________.
a. perfume, perfume
b. cloth, perfume
c. perfume, cloth
d. both goods, neither good
ANSWER: b. cloth, perfume
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

27 ANSWER: a. 2 bottles of perfume.

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

28 ANSWER: d. cloth, perfume

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

29 ANSWER: a. cloth, perfume

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

30 ANSWER: b. cloth, perfume

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

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10 Chapter 3/Interdependence and the Gains from Trade

31
. Refer to the tables shown. Nancy and Roger both could benefit by Nancy specializing in __________
and Roger specializing in __________.
a. perfume, cloth
b. cloth, perfume
c. perfume, perfume
d. cloth, cloth
ANSWER: b. cloth, perfume
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

32
. Refer to the tables shown. Nancy has a comparative advantage in __________ and Roger has a
comparative advantage in __________.
a. cloth, perfume
b. cloth, both goods
c. cloth, neither good
d. perfume, cloth
ANSWER: a. cloth, perfume
TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

31 ANSWER: b. cloth, perfume

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

32 ANSWER: a. cloth, perfume

TYPE: M KEY1: T SECTION: 2 OBJECTIVE: 2 INSTRUCTION: 3 RANDOM: N

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 Chapter 3/Interdependence and the Gains from Trade 11

These figures illustrate the production possibilities available to Tom and Nicole with 40 hours of labor.

33
. Refer to the graphs given. The opportunity cost of 1 video for Tom is
a. 4 books.
b. 2 books.
c. 1 book.
d. 1/2 book.
ANSWER: d. 1/2 book.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

34
. Refer to the graphs given. The opportunity cost of 1 video for Nicole is
a. 40 books.
b. 8 books.
c. 1/8 book.
d. 1/40 book.
ANSWER: b. 8 books.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

33 ANSWER: d. 1/2 book.

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

34 ANSWER: b. 8 books.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

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12 Chapter 3/Interdependence and the Gains from Trade

35
. Refer to the graphs given. The opportunity cost of 1 book for Nicole is
a. 40 videos.
b. 8 videos.
c. 5 videos.
d. 1/8 video.
ANSWER: d. 1/8 video.
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

36
. Refer to the graphs given. The opportunity cost of 1 book for Tom is
a. 4 videos.
b. 3 videos.
c. 2 videos.
d. 1/2 video.
ANSWER: c. 2 videos
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

37
. Refer to the graphs given. Nicole has an absolute advantage in __________ and Tom has an absolute
advantage in __________.
a. both goods, neither good
b. neither good, both goods
c. books, videos
d. videos, books
ANSWER: a. both goods, neither good
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

35 ANSWER: d. 1/8 video.

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

36 ANSWER: c. 2 videos
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

37 ANSWER: a. both goods, neither good

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

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 Chapter 3/Interdependence and the Gains from Trade 13

38
. Refer to the graphs given. Nicole has a comparative advantage in __________ and Tom has a
comparative advantage in __________.
a. videos, books
b. both goods, neither good
c. books, videos
d. neither good, books
ANSWER: c. books, videos
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

39
. Refer to the graphs given. Nicole has a comparative advantage in __________ and Tom has an
absolute advantage in __________.
a. books, videos
b. videos, books
c. books, both goods
d. books, neither good
ANSWER: d. books, neither good
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

40
. Refer to the graphs given. Nicole has an absolute advantage in ________ and Tom has a comparative
advantage in __________.
a. both goods, videos
b. neither good, videos
c. books, neither good
d. both goods, books
ANSWER: a. both goods, videos
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

38 ANSWER: c. books, videos

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

39 ANSWER: d. books, neither good

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

40 ANSWER: a. both goods, videos

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

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14 Chapter 3/Interdependence and the Gains from Trade

41
. Refer to the graphs given. Nicole should specialize in __________ and Tom should specialize in
__________.
a. videos, books
b. books, videos
c. books, neither good
d. both goods, videos
ANSWER: b. books, videos

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4

RANDOM: N

42
. Refer to the graphs given. If Tom and Nicole devote 1/2 of their time (20 hours) to the production of
each good, total production of books by both would be __________ and total production of videos by
both would be __________.
a. 42, 9
b. 21, 4.50
c. 9, 42
d. 4.50, 21
ANSWER: b. 21, 4.50
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

43
. Refer to the graphs given. If Tom and Nicole both specialize in the good in which they have a
comparative advantage, total production of books will be __________ and total production of videos
will be __________.
a. 40, 4
b. 42, 9
c. 9, 42
d. 4, 40
ANSWER: a. 40, 4
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

41 ANSWER: b. books, videos

42 ANSWER: b. 21, 4.50

TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

43 ANSWER: a. 40, 4
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

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 Chapter 3/Interdependence and the Gains from Trade 15

44
. Refer to the graphs given. If Tom and Nicole both specialize in the good in which they have a
comparative advantage, total consumption of books will be __________ and total consumption of
videos will be __________.
a. 40, 4
b. 42, 9
c. 9, 42
d. 4, 40
ANSWER: a. 40, 4
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

45
. Comparative advantage is based on
a. capital costs.
b. labor costs.
c. opportunity costs.
d. dollar price.
ANSWER: c. opportunity costs.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

46
. Trade is based on
a. absolute advantage.
b. comparative advantage.
c. production costs.
d. relative dollar prices.
ANSWER: b. comparative advantage.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

47
. Absolute advantage is found by
a. comparing opportunity costs.
b. calculating the dollar cost of production.
c. comparing the productivity of one nation to that of another.
d. first determining which country has a comparative advantage.
ANSWER: c. comparing the productivity of one nation to that of another.
TYPE: MKEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

44 ANSWER: a. 40, 4
TYPE: M KEY1: G SECTION: 2 OBJECTIVE: 3 GRAPH FORMAT: M QUESTION INSTRUCTION: 4
RANDOM: N

45 ANSWER: c. opportunity costs.

TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

46 ANSWER: b. comparative advantage.

TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

47 ANSWER: c. comparing the productivity of one nation to that of another.

TYPE: MKEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

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16 Chapter 3/Interdependence and the Gains from Trade

48
. Trade can benefit society as a whole because it allows
a. for a more efficient use of resources.
b. for goods to be obtained at a lower opportunity cost.
c. people to specialize in activities in which they have a comparative advantage.
d. All of the above are correct.
ANSWER: d. All of the above are correct.
TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

Hours needed to make one unit of Amount produced in 2400 hours:

Cars Airplanes Cars Airplanes
U.S. 40 160 60 15
Japan 50 150 48 16

49
. Refer to the tables shown. The opportunity cost of 1 car for Japan is
a. 4 airplanes.
b. 3 airplanes.
c. 1/3 airplane.
d. 1/4 airplane.
ANSWER: c. 1/3 airplane.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

50
. Refer to the tables shown. The opportunity cost of 1 airplane for Japan is
a. 4 cars.
b. 3 cars.
c. 1/3 car.
d. 1/4 car.
ANSWER: b. 3 cars.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

51
. Refer to the tables shown. The opportunity cost of 1 car for the U.S. is

48 ANSWER: d. All of the above are correct.

TYPE: M KEY1: D SECTION: 2 OBJECTIVE: 3 RANDOM: Y

49 ANSWER: c. 1/3 airplane.

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

50 ANSWER: b. 3 cars.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

51 ANSWER: d. 1/4 airplane.

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 3/Interdependence and the Gains from Trade 17

a. 4 airplanes.
b. 3 airplanes.
c. 1/3 airplane.
d. 1/4 airplane.
ANSWER: d. 1/4 airplane.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

52
. Refer to the tables given. The opportunity cost of 1 airplane for the U.S. is
a. 4 cars.
b. 3 cars.
c. 1/3 car.
d. 1/4 car.
ANSWER: a. 4 cars.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

53
. Refer to the tables shown. Japan has a comparative advantage in __________ and the U.S. has an
absolute advantage in __________.
a. airplanes, cars
b. cars, airplanes
c. cars, neither good
d. airplanes, both goods
ANSWER: a. airplanes, cars
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

54
. Refer to the tables shown. Japan has an absolute advantage in __________ and the U.S. has a
comparative advantage in __________.
a. both goods, cars
b. both goods, neither good
c. cars, airplanes
d. airplanes, cars
ANSWER: d. airplanes, cars
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

55
. Refer to the tables shown. The U.S. has an absolute advantage in __________ and Japan has an
absolute advantage in __________.

52 ANSWER: a. 4 cars.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

53 ANSWER: a. airplanes, cars

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

54 ANSWER: d. airplanes, cars

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

55 ANSWER: c. cars, airplanes

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
18 Chapter 3/Interdependence and the Gains from Trade

a. airplanes, cars
b. neither good, both goods
c. cars, airplanes
d. neither good, cars
ANSWER: c. cars, airplanes
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

56
. Refer to the tables shown. The U.S. has a comparative advantage in ______ and Japan has a
comparative advantage in __________.
a. airplanes, airplanes
b. cars, airplanes
c. airplanes, cars
d. neither good, cars
ANSWER: b. cars, airplanes
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

57
. Refer to the tables shown. The U.S. and Japan could benefit by the U.S. specializing in __________ and
Japan specializing in ___________.
a. airplanes, airplanes
b. cars, airplanes
c. airplanes, cars
d. neither good, cars
ANSWER: b. cars, airplanes
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

58
. Refer to the tables shown. If the U.S. and Japan trade based on the principle of comparative
advantage, the U.S. will export what product to Japan?
a. cars
b. both airplanes and cars
c. airplanes
d. The U.S. should buy both products from Japan.
ANSWER: a. cars
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

56 ANSWER: b. cars, airplanes

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

57 ANSWER: b. cars, airplanes

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

58 ANSWER: a. cars
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 3/Interdependence and the Gains from Trade 19

59
. Refer to the tables shown. If the U.S. and Japan trade based on the principle of comparative
advantage, Japan will export what product to the U.S.?
a. cars
b. both airplanes and cars
c. airplanes
d. Japan should buy both products from the U.S.
ANSWER: c. airplanes
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

60
. Refer to the tables shown. If the U.S. and Japan trade based on the principle of comparative
advantage, the U.S. will export __________ and Japan will export __________.
a. cars, airplanes
b. airplanes, cars
c. cars, cars
d. airplanes, airplanes
ANSWER: a. cars, airplanes
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

61
. Refer to the tables shown. If Japan and the U.S. trade based on the principle of comparative
advantage,
a. all individuals in both countries will gain.
b. car producers in Japan and airplane producers in the U.S. will gain.
c. some individuals within each society will be made worse off.
d. one country will be better off and the other country will be worse off.
ANSWER: c. some individuals within each society will be made worse off.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4RANDOM: N

62
. Refer to the tables shown. If Japan and the U.S. trade based on the principle of comparative
advantage,
a. all individuals in both countries will gain.
b. both countries can have more airplanes and cars.
c. Japan will specialize in cars and the U.S. will specialize in airplanes.
d. both countries will consume on their own production possibilities frontier.
ANSWER: b. both countries can have more airplanes and cars.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

59 ANSWER: c. airplanes
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

60 ANSWER: a. cars, airplanes

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

61 ANSWER: c. some individuals within each society will be made worse off.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4RANDOM: N

62 ANSWER: b. both countries can have more airplanes and cars.

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 5 RANDOM: N

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
20 Chapter 3/Interdependence and the Gains from Trade

ANSWER: d. not restricting trade.

TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 4 RANDOM: Y

63
. The gains from trade are
a. higher from trade between a rich nation and a poor nation.
b. based on different wage rates between nations.
c. a result of more efficient resource allocation.
d. based on the principle of absolute advantage.
ANSWER: c. a result of more efficient resource allocation.
TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 4 RANDOM: Y

64
. Trade can make everybody better off because it
a. leads to interdependence.
b. increases labor costs.
c. reduces absolute costs of production.
d. allows people to specialize according to comparative advantage.
ANSWER: d. allows people to specialize according to comparative advantage.
TYPE: MKEY1: D SECTION: 3 OBJECTIVE: 4 RANDOM: Y

Use the accompanying table to answer the following questions:

Labor hours needed to make one unit of Amount produced in 40 hours

CheeseBreadCheese Bread
England 1 2 40 20
Spain 2 8 20 5

65
. Refer to the tables shown. The opportunity cost of 1 unit of cheese in England is
a. 4 breads.
b. 2 breads.
c. 1/2 bread.
d. 1/4 bread.
ANSWER: c. 1/2 bread.
TYPE: MKEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

66
. Refer to the tables shown. The opportunity cost of 1 unit of bread in England is

63 ANSWER: c. a result of more efficient resource allocation.

TYPE: M KEY1: D SECTION: 3 OBJECTIVE: 4 RANDOM: Y

64 ANSWER: d. allows people to specialize according to comparative advantage.

TYPE: MKEY1: D SECTION: 3 OBJECTIVE: 4 RANDOM: Y

65 ANSWER: c. 1/2 bread.

TYPE: MKEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

66 ANSWER: b. 2 cheeses.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 3/Interdependence and the Gains from Trade 21

a. 4 cheeses.
b. 2 cheeses.
c. 1 cheese.
d. 1/2 cheese.
ANSWER: b. 2 cheeses.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

67
. Refer to the tables shown. The opportunity cost of 1 unit of cheese in Spain is
a. 2 breads.
b. 1 bread.
c. 1/2 bread.
d. 1/4 bread.
ANSWER: d. 1/4 bread.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

68
. Refer to the tables shown. The opportunity cost of 1 unit of bread in Spain is
a. 4 cheeses.
b. 2 cheeses.
c. 1 cheese.
d. 1/4 cheese.
ANSWER: a. 4 cheeses.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

69
. Refer to the tables shown. England has a comparative advantage in __________ and Spain has a
comparative advantage in __________.
a. bread, cheese
b. cheese, bread
c. both goods, neither good
d. neither good, both goods
ANSWER: a. bread, cheese
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

70
. Refer to the tables shown. England has an absolute advantage in __________ and Spain has an
absolute advantage in __________.

67 ANSWER: d. 1/4 bread.

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

68 ANSWER: a. 4 cheeses.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

69 ANSWER: a. bread, cheese

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

70 ANSWER: c. both goods, neither good

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
22 Chapter 3/Interdependence and the Gains from Trade

a. bread, cheese
b. cheese, bread
c. both goods, neither good
d. neither good, both goods
ANSWER: c. both goods, neither good
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

71
. Refer to the tables shown. England has a comparative advantage in __________ and Spain has an
absolute advantage in __________.
a. bread, cheese
b. bread, neither good
c. cheese, both goods
d. both goods, cheese
ANSWER: b. bread, neither good
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

72
. Refer to the tables shown. England has an absolute advantage in __________ and Spain has a
comparative advantage in __________.
a. bread, cheese
b. bread, neither good
c. cheese, both goods
d. both goods, cheese
ANSWER: d. both goods, cheese
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

73
. Refer to the tables shown. England and Spain could benefit by England specializing in __________
and Spain specializing in __________.
a. bread, cheese
b. cheese, bread
c. both goods, neither good
d. neither good, both goods
ANSWER: a. bread, cheese
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

71 ANSWER: b. bread, neither good

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

72 ANSWER: d. both goods, cheese

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

73 ANSWER: a. bread, cheese

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
 Chapter 3/Interdependence and the Gains from Trade 23

74
. Refer to the tables shown. If England and Spain trade based on the principle of comparative
advantage, England will export which product to Spain?
a. bread
b. cheese
c. both cheese and bread
d. England cannot benefit from trade with Spain.
ANSWER: a. bread
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

75
. Refer to the tables shown. If England and Spain trade based on the principle of comparative
advantage, Spain will export which product to England?
a. bread
b. both bread and cheese
c. cheese
d. Spain cannot benefit from trade with England.
ANSWER: c. cheese
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

76
. Refer to the tables shown. If England and Spain trade based on the principle of comparative
advantage, England will export __________ and Spain will export __________.
a. bread, cheese
b. bread, bread
c. cheese, cheese
d. cheese, bread
ANSWER: a. bread, cheese
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

77
. Refer to the tables shown. If England and Spain trade based on the principle of comparative
advantage, England will import __________ and Spain will import __________.
a. bread, cheese
b. bread, bread
c. cheese, cheese
d. cheese, bread
ANSWER: d. cheese, bread
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

74 ANSWER: a. bread
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

75 ANSWER: c. cheese
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

76 ANSWER: a. bread, cheese

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

77 ANSWER: d. cheese, bread

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.
24 Chapter 3/Interdependence and the Gains from Trade

78
. Refer to the tables shown. If England and Spain specialize and trade according to their comparative
advantage,
a. England will specialize in and export bread.
b. some individuals in each country will be hurt.
c. more of each good can be consumed in both countries.
d. All of the above are correct.
ANSWER: d. All of the above are correct.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

79
. Refer to the tables shown. If England and Spain specialize and trade according to their respective
comparative advantage,
a. all individuals in both countries will benefit.
b. Spain will specialize in and export bread.
c. England will produce more bread than in the absence of trade.
d. England will produce more cheese than in the absence of trade.
ANSWER: c. England will produce more bread than in the absence of trade.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4RANDOM: Y

78 ANSWER: d. All of the above are correct.

TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4 INSTRUCTION: 1 RANDOM: Y

79 ANSWER: c. England will produce more bread than in the absence of trade.
TYPE: M KEY1: T SECTION: 3 OBJECTIVE: 4RANDOM: Y

Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc.