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Exam 2: Specialization and Exchange

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Question 41

Multiple Choice

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If society were to experience an increase in its available resources, its production possibilities frontier would:

A) shift outward.
B) shift inward.
C) not move.
D) become convex.

E) C) and D)
F) A) and C)

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Question 42

Multiple Choice

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Economic theory states that losing a comparative advantage at producing one good means creating a comparative advantage at producing another. As an economy transitions from producing one good to producing another good:

A) those who must transition from the production of one good to the production of another good may find the transition difficult in the short run.
B) the transition can be seen as a success in the short run.
C) outsourcing will always be good for every member of a society.
D) no one will complain in the short run, but in the long run people may not like the transition.

E) A) and D)
F) None of the above

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Question 43

Multiple Choice

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Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. What terms of trade would both countries be willing to agree to?

Tom and Jerry have one day to work, but two tasks to focus on: building chairs and tables. If Tom spends all day building chairs, he will make 16 chairs. If he instead devotes his day to building tables, Tom will make 4 tables. If Jerry spends his day building chairs, he will make 14 chairs; if he spends the day building tables, he will make 7 tables. Jerry has a comparative advantage at producing _____ because he has a _____ opportunity cost of making that good.

When nations trade:

Consider a society facing the production possibilities frontiers in the figure shown. Out of the options provided, which is the most likely cause of a society moving from PPF₃ to PPF₁?

Consider a society facing the production possibilities frontiers in the figure shown. Out of the options provided, which is the most likely cause of a society moving from PPF₁ to PPF₂?

Consider the production possibilities frontier displayed in the figure shown. The opportunity cost of one bushel of wheat is:

The production possibilities frontier:

Suppose that a worker in Country A can produce either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can produce either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Country A specializes in bananas and Country B specializes in tomatoes. Regarding the terms of trade, Country B will accept no _____ than _____ for every _____.

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Which of the following statements is true?Country A has an absolute advantage at producing both avocados and t-shirts.Country B has a comparative advantage at producing t-shirts.Country B would benefit from trade, but Country A would not.

When a producer has a comparative advantage at producing a good, it means the producer:

Which of the following statements about absolute and comparative advantage is not true?

Which of the following statements about trade is true?

Suppose that, given the same number of workers, the United States can produce five times as many computers or ten times as many airplanes as Mexico. Which of the following statements is true?

Tom and Jerry have one day to work, but two tasks to focus on: building chairs and tables. If Tom spends all day building chairs, he will make 16 chairs. If he instead devotes his day to building tables, Tom will make 4 tables. If Jerry spends his day building chairs, he will make 14 chairs; if he spends the day building tables, he will make 7 tables. After looking at the production possibilities for both Tom and Jerry, what can we surmise?

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Canada's opportunity cost of producing a pair of shoes is _____ than the United States, so Canada should specialize in _____ production.

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. What are two possible consumption bundles that Country B could produce?

A country completely specializes in production when it spends all of its resources producing

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. Which of the following statements is true regarding Country A's opportunity cost of a t-shirt?