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Chapter 3

Chapter 3 discusses the concepts of absolute and comparative advantage in trade, highlighting reasons for dependence on others for goods and services. It includes examples of opportunity costs in production scenarios involving individuals like Linda, Tom, Alex, Mark, Mike, and Sandy. The chapter emphasizes the significance of these advantages in determining trade patterns and the benefits of specialization.

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2 views

Chapter 3

Chapter 3 discusses the concepts of absolute and comparative advantage in trade, highlighting reasons for dependence on others for goods and services. It includes examples of opportunity costs in production scenarios involving individuals like Linda, Tom, Alex, Mark, Mike, and Sandy. The chapter emphasizes the significance of these advantages in determining trade patterns and the benefits of specialization.

Uploaded by

Diệu Huyền
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 3: Gains from Trade

1026. (0.2 point)


Which of the following is a reason people choose to depend on others for goods and
services EXCEPT ?
a. to improve their lives
b. to allow them to enjoy a greater variety of goods and services
c. to consume more of each good without working any more hours
d. to allow people to produce outside their production possibilities frontiers

1027. (0.2 point)


Absolute advantage is found by comparing different producers’
a. marginal cost.
b. output requirements per unit of input.
c. input requirements per unit of output.
d. production outputs.

1028. (0.2 point)


Alex and Mark are two woodworkers who both make tables and chairs. In one month,
Alex can make 4 tables or 20 chairs, while Mark can make 6 tables or 18 chairs. Given
this, we know that
a. Alex has an absolute advantage in chairs
b. Alex has a comparative advantage in tables
c. Mark has an absolute advantage in chairs
d. Mark has a comparative advantage in chairs

1029. (0.2 point)


Specialization and trade related to
a. absolute advantage
b. comparative advantage
c. trade off
d. division of the economic pie
1030. (0.2 point)
Which of the following factor is related to comparative advantage ?
a. output per hour
b. opportunity cost
c. efficiency
d. bargaining strength in international trade

1031. (0.2 point)


Assume that Linda and Tom can switch between producing wheat and producing beef at
a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in
12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10
minutes.
What is Linda’s opportunity cost of producing one pound of beef?
a. 3/5 bushel of wheat
b. 6/5 bushel of wheat
c. 4/3 bushel of wheat
d. 5/3 bushel of wheat

1032. (0.2 point)


Assume that Linda and Tom can switch between producing wheat and producing beef at
a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in
12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10
minutes.
What is Linda’s opportunity cost of producing one bushel of wheat?
a. 3/5 pound of beef
b. 6/5 pound of beef
c. 4/3 pound of beef
d. 5/3 pound of beef

1033. ( 0.2 point)


Assume that Linda and Tom can switch between producing wheat and producing beef at
a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in
12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10
minutes.
What is Tom’s opportunity cost of producing one bushel of wheat?
a. 2/3 pound of beef
b. 3/4 pound of beef
c. 5/6 pound of beef
d. 3/2 pound of beef

1034. (0.2 point)


Assume that Linda and Tom can switch between producing wheat and producing beef at
a constant rate. In 20 minutes, Linda can make 1 Bushel of Wheat and 1 Pound of Beef in
12 minutes. Tom can make 1 Bushel of Wheat in 15 minutes and 1 Pound of Beef in 10
minutes.
What is Tom’s opportunity cost of producing one pound of beef ?
a. 2/3 bushel of wheat
b. 3/4 bushel of wheat
c. 5/6 bushel of wheat
d. 3/2 bushel of wheat

1035.
The opportunity cost of an item is
a. the number of hours that one must work in order to buy one unit of the item
b. what you give up to get that item
c. always less than the dollar value of the item
d. always greater than the cost of producing the item
1036.
Suppose a gardener produces both green beans and corn in her garden. If she must give
up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1
bushel of green beans is
a. 0.36 bushel of corn
b. 2.8 bushels of corn
c. 14 bushels of corn
d. 70 bushels of corn
1037.
Mike and Sandy are two woodworkers who both make tables and chairs. In one month,
Mike can make 4 tables or 20 chairs, while Sandy can make 6 tables or 18 chairs. Given
this, we know that
a. Mike has an absolute advantage in chairs
b. Mike has a comparative advantage in tables
c. Sandy has an absolute advantage in chairs
d. Sandy has a comparative advantage in chairs
1038.
If Shawn can produce donuts at a lower opportunity cost than Sue, then
a. Shawn has a comparative advantage in the production of donuts
b. Sue has a comparative advantage in the production of donuts
c. Shawn should not produce donuts
d. Shawn is capable of producing more donuts than Sue in a given
amount of time
1039.
Comparative advantage is related most closely to which of the following?
a. output per hour
b. opportunity cost
c. efficiency
d. bargaining strength in international trade
1040.
Specialization and trade are closely linked to
a. absolute advantage
b. comparative advantage
c. gains to some traders that exactly offset losses to other traders
d. shrinkage of the economic pie
Short Answers
1051. (0.5 point)
What does absolute advantage mean ?

1052. (0.5 point)


What does comparative advantage mean?

1053. (0.5 point)


Is absolute advantage or comparative advantage important in determining trade patterns ?

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