1.3 & 1.4 - Comparative Advantage and Demand

Which of the following would be most likely to occur if the United States placed high tariffs on imported goods?

• Workers in the United States would have more jobs in the long run.

• Income in the United States would be redistributed from the rich to the poor.

• The United States standard of living would increase.

• The United States economy would become less efficient.

• United States exports would increase.

Which of the following best explains why many United States economists support free international trade?

• Workers who lose their jobs can collect unemployment compensation.

• It is more important to reduce world inflation than to reduce United States unemployment.

• Workers are not affected; only businesses suffer.

• The long-run gains to consumers and some producers exceed the losses to other producers.

• Government can protect United States industries while encouraging free trade.

Wally can make 40 units of good X or 30 units of good Y in a day, and Sam can make 20 units of good X or 10 units of good Y in a day. Assuming constant trade-offs between good X and good Y, which of the following is true?

• Sam has a comparative advantage in making good X.

• Sam has a comparative advantage in making good Y.

• Wally has a comparative advantage in making both goods.

• Sam has an absolute advantage in making good X.

• Sam has an absolute advantage in making good Y.

Using equal amounts of labor hours, Country X and Country Y can each produce the number of watches and radios shown in the production possibilities curves above. Based on the information, which of the following is true?

• Country X has an absolute advantage in the production of both watches and radios and a comparative advantage in the production of watches.

• Country Y has an absolute advantage in the production of both watches and radios and a comparative advantage in the production of radios.

• Countries X and Y can engage in a mutually advantageous trade by exchanging 1 watch for 1 radio.

• Country Y is willing to give up 2 watches in exchange for 1 radio from Country X.

• Country X is willing to give up 2 radios in exchange for 1 watch from Country Y.

The theory of comparative advantage implies that Alpha would find it advantageous to

• export grain and import steel

• export steel and import grain

• export both grain and steel and import nothing

• import both grain and steel and export nothing

• trade 1 ton of grain for 0.5 ton of steel

The table below shows the production alternatives of Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed.

Which of the following is true according to the data in the table?

• Country A has an absolute and comparative advantage in the production of computers.

• Country B has an absolute and comparative advantage in the production of computers.

• Country B should import computers and export cars.

• Since Country B has an absolute advantage in the production of both goods, it will not trade with Country A.

• Neither country can benefit from trade.

The table below indicates the number of labor hours required in Countries X and Y to produce one unit of food or one unit of clothing.

Given this information, which of the following statements is correct?

• X has a comparative advantage in the production of both food and clothing.

• Y has a comparative advantage in the production of both food and clothing.

• X has a comparative advantage in food production, whereas Y has a comparative advantage in clothing production.

• Y has a comparative advantage in food production, whereas X has a comparative advantage in clothing production.

• Neither country has a comparative advantage in the production of either good.

Which of the following will cause a movement along the demand curve for chicken, a normal good, resulting in an increase in the quantity demanded?

• An increase in consumers' income

• An increase in the price of fish, a substitute good

• An increase in the price of barbecue sauce, a complementary good

• A decrease in the price of chicken

• A decrease in the number of consumers of chicken

The diagram above shows two demand curves for video games identified as D1 and D2

Which of the following changes will most likely result in a movement from point X to point Y1 along the demand curve D1?

• A decrease in the number of buyers

• A decrease in the price of video games

• A decrease in the expected future price of video games

• An increase in the negative effects of video games on players

• An increase in the use of video games for educational purposes

The diagram above shows two demand curves for video games identified as D1 and D2

Which of the following changes will most likely cause a shift of the demand curve from D1 to D2 as shown in the diagram?

• An increase in consumers’ income, assuming that video games are a normal good

• An increase in the price of game consoles, a complementary good

• A decrease in the price of mobile games, a substitute good

• A decrease in the number of buyers in the market

• A decrease in the price of video games