Econ-7.1 Formative Assessment- Option 1

Categorize

Options (5)

Lower Factor of Production Costs

Gain Markets

Increase Selection

Lower Prices

Better Quality Goods

Identify who benefits (either CONSUMERS or BUSINESSES) based on the “Gains made from International Trade” given below.

BUSINESSES

CONSUMERS

Multiple Choice

Suppose Brazil can produce 1 unit of flowers while giving up less in the production of wheat than Mexico while Mexico can produce 1 unit of wheat while giving up less in terms of producing flowers than Brazil. Assume these countries produce only these two goods. Based on the scenario above; Brazil will have a comparative advantage in producing ______ and Mexico will have a comparative advantage in producing _____.

• flowers; wheat

• wheat; flowers

• wheat; wheat

• flowers; flowers

Multiple Choice

When countries specialize in producing ONE or VERY FEW goods/services in which they have a comparative advantage, they end up producing ________.

• just enough of those goods/service for their own needs and wants.

• more of these goods/services than they want or need.

• far less of these goods/services than they want or need.

• an unknown amount of these goods and services because there is no connection to specailization and the amount of a good or service produced.

Multiple Select

Identify each of the following statements that are true based on the following statement:

Finland has a comparative advantage in the production of stainless steel over Sweden.

• Sweden has a lower opportunity cost in producing stainless steel as compared to Finland.

• Finland has a lower opportunity cost in producing stainless steel as compared to Sweden.

•  Finland should specialize in the production of a good or service other than stainless steel.

• To make trade between Sweden and Finland to be as efficient as possible, Sweden should let Finland specialize in the production of stainless steel and Sweden should specialize in producing a different good or service in which it has a comparative advantage over Finland.