CHAPTER 3 - MICRO

Suppose the world consists of two countries— Canada and Mexico. Furthermore, suppose there are only two goods—food and clothing. Which of the following statements is true?

• a. If Canada has an absolute advantage in the production of food, then Mexico must have an absolute advantage in the production of clothing.

• b. If Canada has a comparative advantage in the production of food, then Mexico must have a comparative advantage in the production of clothing.

• c. If Canada has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing.

• d. If Canada has a comparative advantage in the production of food, Mexico might also have a comparative advantage in the production of food.

• e. None of the answer choices are correct.

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________.

• a. the domestic price of 1 pencil is 1/4 of a pen

• b. the domestic price of 1 pencil is 4 pens

• c. the domestic price of 1 pencil is 1/3 of a pen

• d. the domestic price of 1 pencil is 12 pens

• e. the domestic price of 1 pencil is 3 pens

If a nation has a comparative advantage in the production of a good, ________.

• a. it can produce that good at a lower opportunity cost than its trading partner

  
  

• b. it can produce that good using fewer resources than its trading partner

  
  

• c. it can benefit by restricting imports of that good

  
  

• d. it must be the only country with the ability to produce that good

  
  

• e. none of the answer choices are correct

  
  

Which of the following statements about trade is true?

• a. Unrestricted international trade benefits every person in a country equally.

  
  

• b. People that are skilled at all activities cannot benefit from trade.

  
  

• c. Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage.

  
  

• d. Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

  
  

If a nation has an absolute advantage in the production of a good, ________.

• a. it can produce that good at a lower opportunity cost than its trading partner

  
  

• b. it can produce that good using fewer resources than its trading partner

  
  

• c. it can benefit by restricting imports of that good

  
  

• d. it will specialize in the production of that good and export it

  
  

• e. none of the answer choices are correct

  
  

Suppose a country's workers can produce 4 pens per hour or 12 pencils per hour. If there is no trade, ________.

• a. the opportunity cost of 1 pen is 1/3 of a pencil

  
  

• b. the opportunity cost of 1 pen is 3 pencils

  
  

• c. the opportunity cost of 1 pen is 12 pencils

  
  

• d. the opportunity cost of 1 pen is 1/4 of a pencil

  
  

• e. the opportunity cost of 1 pen is 4 pencils

  
  

The following table shows the units of output a worker can produce per month in Germany and Poland. Use this table to answer the question.
Poland should ________.

• a. specialize in wheat production, export wheat, and import computers

  
  

• b. specialize in computers production, export computers, and import wheat

  
  

• c. produce both goods because neither country has a comparative advantage

  
  

• d. produce neither good because it has an absolute disadvantage in the production of both goods

  
  

The following table shows the units of output a worker can produce per month in Germany and Poland. Use this table to answer the question.

The opportunity cost of 1 unit of computers in Germany is ________.

• a. 4 units of wheat

  
  

• b. 1/4 of a unit of wheat

  
  

• c. 1/5 of a unit of wheat

  
  

• d. 5 units of wheat

  
  

The following table shows the units of output a worker can produce per month in Germany and Poland. Use this table to answer the question.

The opportunity cost of 1 unit of wheat in Poland is ________.

• a. 2 units of computers

  
  

• b. 1/4 of a unit of computers

  
  

• c. 1/2 of a unit of computers

  
  

• d. 4 units of computers

  
  

Use the production possibilities frontiers in the exhibit to answer the question. Assume each country has the same number of workers, say 20 million, and that each axis is measured in metric tons per month.

Colombia will export ________.

• a. both fruit and beef

  
  

• b. fruit

  
  

• c. beef

  
  

• d. neither fruit nor beef