chap 3

The opportunity cost of an item is

• the number of hours that one must work in order to buy one unit of the item

• what you give up to get that item

• always less than the dollar value of the item

• always greater than the cost of producing the item

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

• 0.36 bushel of corn

• 2.8 bushels of corn

• 14 bushels of corn

• 70 bushels of corn

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

• Mike has an absolute advantage in chairs

• Mike has a comparative advantage in tables

• Sandy has an absolute advantage in chairs

• Sandy has a comparative advantage in chairs

If Shawn can produce donuts at a lower opportunity cost than Sue, then

• Shawn has a comparative advantage in the production of donuts

• Sue has a comparative advantage in the production of donuts

• Shawn should not produce donuts

• Shawn is capable of producing more donuts than Sue in a given amount of time

Comparative advantage is related most closely to which of the following?

• output per hour

• opportunity cost

• efficiency

• bargaining strength in international trade

Specialization and trade are closely linked to

• absolute advantage

• comparative advantage

• gains to some traders that exactly offset losses to other traders

• shrinkage of the economic pie

Trade can make everybody better off because it

• increases cooperation among nations

• allows people to specialize according to comparative advantage

• requires some workers in an economy to be retrained

• reduces competition among domestic companies

Refer to Table 3-1. What is Andia’s opportunity cost of producing one pound of beef?

• 3/5 bushel of wheat

• 6/5 bushel of wheat

• 4/3 bushel of wheat

• 5/3 bushel of wheat

Refer to Table 3-1. What is Andia’s opportunity cost of producing one bushel of wheat?

• 3/5 pound of beef

• 6/5 pound of beef

• 4/3 pound of beef

• 5/3 pound of beef

Refer to Table 3-1. What is Zardia’s opportunity cost of producing one bushel of wheat?

• 2/3 pound of beef

• 3/4 pound of beef

• 5/6 pound of beef

• 3/2 pound of beef