Free Printable ECON_2105_20

1.

What is absolute advantage?

a)

The ability to produce more of a good with fewer resources than another country

b)

The ability to produce a good at a lower opportunity cost than another country

c)

The ability to produce more goods than any other country

d)

The ability to restrict imports to protect domestic industries

2.

What is the main reason a country with absolute advantage in all goods would still engage in international trade?

a)

To reduce production costs

b)

To benefit from comparative advantage and maximize economic efficiency

c)

To increase tariffs on imports

d)

To restrict foreign competition

3.

Which of the following statements best describes the benefit of comparative advantage and international trade?

a)

It allows countries to consume beyond their production possibilities frontier

b)

It ensures all countries have equal trade balances

c)

It guarantees that all countries produce everything they need

d)

It restricts countries from engaging in trade

4.

If Country A can produce 10 tons of steel or 5 tons of wheat with one unit of resources, and Country B can produce 8 tons of steel or 4 tons of wheat with one unit of resources, which country has the absolute advantage in steel production?

a)

Country A

b)

Country B

c)

Both have the same absolute advantage

d)

Neither has an advantage

5.

If Country A can produce 10 tons of steel or 5 tons of wheat with one unit of resources, and Country B can produce 8 tons of steel or 4 tons of wheat with one unit of resources, which country has the absolute advantage in wheat production?

a)

Country A

b)

Country B

c)

Both have the same absolute advantage

d)

Neither has an advantage

6.

If Country A can produce 10 tons of steel or 5 tons of wheat with one unit of resources, and Country B can produce 8 tons of steel or 4 tons of wheat with one unit of resources, which country has the comparative advantage in steel production?

a)

Country A

b)

Country B

c)

Both have the same absolute advantage

d)

Neither has an advantage. The opportunity cost is the same

7.

How does specialization based on comparative advantage benefit countries involved in trade?

a)

It ensures that countries become entirely self-sufficient and do not need to trade with others.

b)

It increases efficiency and allows countries to enjoy a greater variety of goods and services

c)

It decreases the variety of goods available to consumers by limiting production to a narrow range of products.

d)

It leads to higher production costs for countries as they focus on producing goods they are less efficient at producing.

8.

Which of the following is a key factor that determines comparative advantage?

a)

Total production capacity

b)

The total population size of a country.

c)

Relative opportunity costs

d)

Currency exchange rates

9.

How does opportunity cost relate to comparative advantage?

a)

Comparative advantage is determined by the absolute cost of production

b)

Comparative advantage is determined by the lower opportunity cost of production

c)

Opportunity cost does not affect comparative advantage

d)

Opportunity cost increases when comparative advantage is maximized

10.

Which country should specialize in producing a good, according to the theory of comparative advantage?

a)

The country with the higher production capacity

b)

The country with the more advanced technology

c)

The country with the higher population

d)

The country with the lower opportunity cost for that good

11.

How does absolute advantage differ from comparative advantage?

a)

Absolute advantage considers production efficiency; comparative advantage considers opportunity cost

b)

Absolute advantage is concerned with technical capabilities

c)

Comparative advantage is based on production capacity

d)

Absolute advantage is about currency strength

12.

What is a likely outcome when countries engage in trade based on comparative advantage?

a)

Decreased global economic output

b)

Lower diversity of available goods

c)

Higher prices for traded goods

d)

Increased global economic output and welfare

13.

Country X can produce 20 units of good A or 40 units of good B. Country Y can produce 30 units of good A or 60 units of good B. What is the opportunity cost of producing one unit of good A in Country X?

a)

0.5 units of good B

b)

1 unit of good B

c)

2 units of good B

d)

3 units of good B

14.

Country A can produce 15 cars or 45 computers. What is the opportunity cost of producing one car in terms of computers?

a)

3 computers

b)

2 computers

c)

1/5 computer

d)

5 computers

15.

If Country A can produce 30 units of good X or 10 units of good Y, and Country B can produce 20 units of good X or 20 units of good Y, which country has a comparative advantage in good Y?

a)

Country A

b)

Country B

c)

Neither country

d)

Both countries

16.

Suppose Country Z can produce 100 units of good C or 200 units of good D. What is the opportunity cost of producing 1 unit of good C in terms of good D?

a)

0.5 units of good D

b)

1 unit of good D

c)

2 units of good D

d)

3 units of good D

17.

Country M can produce 50 tons of grain or 25 tons of meat. Country N can produce 40 tons of grain or 40 tons of meat. What is the opportunity cost of producing 1 ton of grain in Country M?

a)

2 tons of meat

b)

1.5 tons of meat

c)

1 ton of meat

d)

0.5 ton of meat

18.

What is the main reason a country with absolute advantage in all goods would still engage in international trade?

a)

To reduce production costs

b)

To benefit from comparative advantage and maximize economic efficiency

c)

To increase tariffs on imports

d)

To restrict foreign competition

19.

Why is comparative advantage more important than absolute advantage in determining trade patterns?

a)

Because it ensures lower production costs

b)

Because it allows countries to specialize based on lower opportunity costs, leading to greater overall efficiency

c)

Because it focuses solely on technology

d)

Because it promotes protectionism

20.

How does specialization based on comparative advantage benefit countries?

a)

It allows countries to produce everything they consume

b)

It leads to increased economic output and variety of goods available

c)

It guarantees equal trade balances

d)

It results in higher tariffs

21.

What can a country gain by trading according to comparative advantage?

a)

Higher production costs

b)

Decreased efficiency in resource allocation

c)

Reduced economic growth

d)

Access to a wider variety of goods and services

22.

What happens to global economic efficiency when countries trade based on comparative advantage?

a)

It decreases

b)

It remains unchanged

c)

It increases, as countries specialize in producing goods with the lowest opportunity cost

d)

It fluctuates unpredictably

23.

What might a country risk if it decides to produce all goods domestically without engaging in trade?

a)

Greater economic efficiency

b)

Higher opportunity costs and less efficient resource allocation

c)

Increased global competitiveness

d)

Lower production costs for all goods

24.

Country A can produce 100 units of good X or 200 units of good Y. Country B can produce 80 units of good X or 160 units of good Y. What is the opportunity cost of producing one unit of good X in Country A?

a)

2 units of good Y

b)

0.5 units of good Y

c)

1 unit of good Y

d)

1.5 units of good Y

25.

If Country X has an opportunity cost of 4 units of good B for every unit of good A produced, and Country Y has an opportunity cost of 6 units of good B for every unit of good A produced, which country has a comparative advantage in producing good A?

a)

Country X

b)

Country Y

c)

Both countries

d)

Neither country

26.

What is intra-industry trade?

a)

Trade between industries in different countries

b)

Trade that occurs under a regional trade agreement

c)

Trade between two completely different industries

d)

Trade of goods and services within the same industry between countries

27.

Which of the following is a primary characteristic of intra-industry trade?

a)

It involves countries with vastly different economic structures

b)

It primarily occurs between countries with similar levels of development and economic size

c)

It is limited to agricultural products

d)

It reduces the variety of products available to consumers

28.

What is one reason for the prevalence of intra-industry trade between similar economies?

a)

Economies of scale and product differentiation

b)

Differences in technology

c)

Varying levels of natural resources

d)

High barriers to entry in foreign markets

29.

Which of the following industries is most likely to engage in intra-industry trade?

a)

Wheat farming

b)

Textile production

c)

Coal mining

d)

Automobile manufacturing

30.

Why might two similar economies trade similar goods with each other?

a)

To reduce overall production costs

b)

To exploit absolute advantages

c)

To offer consumers a greater variety of choices and increase market competition

d)

To decrease overall trade volume

31.

How does intra-industry trade benefit producers?

a)

By decreasing market competition

b)

By allowing producers to benefit from economies of scale

c)

By reducing the need for innovation

d)

By eliminating trade barriers

32.

What is a primary benefit of reducing barriers to international trade?

a)

Decreased global competition

b)

Increased efficiency and specialization among trading nations

c)

Higher production costs

d)

Greater trade restrictions

33.

Which of the following is a common barrier to international trade?

a)

Free trade agreements

b)

Tariffs and quotas

c)

Comparative advantage

d)

Technological innovation

34.

What is an example of a non-tariff barrier to international trade?

a)

Quotas

b)

Free trade agreements

c)

Export incentives

d)

Safety regulations

35.

How does international trade promote economic growth?

a)

By creating trade deficits

b)

By encouraging specialization and increasing market size

c)

By limiting access to foreign goods

d)

By reducing domestic productivity

36.

Which of the following is a potential disadvantage of reducing trade barriers?

a)

It can cause job displacement in industries that are less competitive internationally

b)

It can lead to a decrease in domestic competition

c)

It guarantees trade surpluses

d)

It reduces consumer choice

37.

What role do free trade agreements play in international trade?

a)

They increase trade barriers between countries

b)

They eliminate tariffs and quotas between member countries, promoting trade

c)

They limit access to foreign markets

d)

They increase government control over trade

38.

How can reducing trade barriers lead to increased innovation?

a)

By reducing the need for product differentiation

b)

By increasing competition, which encourages firms to innovate to maintain market share

c)

By decreasing the number of competitors

d)

By eliminating the need for research and development

39.

What is a potential benefit for developing countries that reduce trade barriers?

a)

Access to advanced technologies and capital goods from developed countries

b)

Higher domestic prices for goods

c)

Reduced foreign investment

d)

Increased tariffs on exports

40.

Suppose a country removes a 10% tariff on imported electronics, reducing the average price from $500 to $450. Previous equilibrium quantity demanded was 100,000 units. If the price elasticity of demand is -1.2, what will be the new equilibrium quantity demanded?

a)

100,000

b)

120,000

c)

115,000

d)

112,000

41.

Suppose a country removes a 5% tariff on imported furniture, reducing the average price from $1,000 to $950. Previous equilibrium quantity demanded was 80,000 units. If the price elasticity of demand is -0.8, what will be the new equilibrium quantity demanded?

a)

83,200

b)

78,800

c)

80,000

d)

82,000

42.

Suppose a country imposes a 20% tariff on imported luxury watches, increasing the average price from $5,000 to $6,000. The previous equilibrium quantity demanded was 10,000 units. If the price elasticity of demand is 1.5, what will be the new equilibrium quantity demanded?

a)

7,000

b)

8,000

c)

9,000

d)

10,000

43.

Suppose a country imposes a 25% tariff on imported computers, increasing the average price from $1,000 to $1,250. The previous equilibrium quantity demanded was 60,000 units. If the price elasticity of demand is 0.8, what will be the new equilibrium quantity demanded?

a)

45,000

b)

48,000

c)

50,000

d)

54,000

44.

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in rubber?

a)

Japan

b)

Malaysia

c)

Neither

d)

Both

45.

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in radios?

a)

Japan

b)

Malaysia

c)

Neither

d)

Both

46.

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Which product should Japan specialize in?

a)

Rubber

b)

Radios

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

47.

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Which product should Malaysia specialize in?

a)

Rubber

b)

Radios

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

48.

In Australia, a farmer can produce 50 bushels of wheat or 200 kilograms of cotton. In Canada, a farmer can produce 30 bushels of wheat or 240 kilograms of cotton. Who has the absolute advantage in wheat?

a)

Australia

b)

Canada

c)

Neither

d)

Both

49.

In Australia, a farmer can produce 50 bushels of wheat or 200 kilograms of cotton. In Canada, a farmer can produce 30 bushels of wheat or 240 kilograms of cotton. Who has the absolute advantage in cotton?

a)

Australia

b)

Canada

c)

Neither

d)

Both

50.

In Australia, a farmer can produce 50 bushels of wheat or 200 kilograms of cotton. In Canada, a farmer can produce 30 bushels of wheat or 240 kilograms of cotton. Which product should Australia specialize in?

a)

Wheat

b)

Cotton

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

51.

In Australia, a farmer can produce 50 bushels of wheat or 200 kilograms of cotton. In Canada, a farmer can produce 30 bushels of wheat or 240 kilograms of cotton. Which product should Canada specialize in?

a)

Wheat

b)

Cotton

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

52.

In China, a factory can produce 100 units of electronics or 500 pieces of furniture. In Vietnam, a factory can produce 200 units of electronics or 400 pieces of furniture. Who has the absolute advantage in electronics?

a)

China

b)

Vietnam

c)

Neither

d)

Both

53.

In China, a factory can produce 100 units of electronics or 500 pieces of furniture. In Vietnam, a factory can produce 200 units of electronics or 400 pieces of furniture. Who has the absolute advantage in furniture?

a)

China

b)

Vietnam

c)

Neither

d)

Both

54.

In China, a factory can produce 100 units of electronics or 500 pieces of furniture. In Vietnam, a factory can produce 200 units of electronics or 400 pieces of furniture. Which product should China specialize in?

a)

electronics

b)

furniture

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

55.

In China, a factory can produce 100 units of electronics or 500 pieces of furniture. In Vietnam, a factory can produce 200 units of electronics or 400 pieces of furniture. Which product should Vietnam specialize in?

a)

electronics

b)

furniture

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

56.

In France, a vineyard can produce 60 bottles of wine or 120 kilograms of cheese. In Italy, a vineyard can produce 80 bottles of wine or 150 kilograms of cheese. Who has the absolute advantage in wine?

a)

France

b)

Italy

c)

Neither

d)

Both

57.

In France, a vineyard can produce 60 bottles of wine or 120 kilograms of cheese. In Italy, a vineyard can produce 80 bottles of wine or 150 kilograms of cheese. Who has the absolute advantage in cheese?

a)

France

b)

Italy

c)

Neither

d)

Both

58.

In France, a vineyard can produce 60 bottles of wine or 120 kilograms of cheese. In Italy, a vineyard can produce 80 bottles of wine or 150 kilograms of cheese. Which product should France specialize in?

a)

wine

b)

cheese

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

59.

In France, a vineyard can produce 60 bottles of wine or 120 kilograms of cheese. In Italy, a vineyard can produce 80 bottles of wine or 150 kilograms of cheese. Which product should Italy specialize in?

a)

wine

b)

cheese

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

60.

In India, a worker can process 80 kilograms of tea or 100 kilograms of spices. In Sri Lanka, a worker can process 80 kilograms of tea or 120 kilograms of spices. Who has the absolute advantage in tea?

a)

India

b)

Sri Lanka

c)

Neither

d)

Both

61.

In India, a worker can process 80 kilograms of tea or 100 kilograms of spices. In Sri Lanka, a worker can process 80 kilograms of tea or 120 kilograms of spices. Who has the absolute advantage in spices?

a)

India

b)

Sri Lanka

c)

Neither

d)

Both

62.

In India, a worker can process 80 kilograms of tea or 100 kilograms of spices. In Sri Lanka, a worker can process 80 kilograms of tea or 120 kilograms of spices. Which product should India specialize in?

a)

tea

b)

spices

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

63.

In India, a worker can process 80 kilograms of tea or 100 kilograms of spices. In Sri Lanka, a worker can process 80 kilograms of tea or 120 kilograms of spices. Which product should Sri Lanka specialize in?

a)

tea

b)

spices

c)

Both. They have the absolute advantage.

d)

Neither. They have no comparative advantage

64.

The above chart shows the PPF for both the US and Brazil for two goods, Sugar Cane and Wheat. According to these curves, _______ has a comparative advantage in wheat and _______ has a comparative advantage in sugar cane.

a)

Brazil; Brazil

b)

Brazil; US

c)

US; US

d)

US; Brazil

65.

Below are the number of bushels of olives and grapes that a single farmer can produce in Greece and Italy.

Country

Olives

Grapes

Greece

20

60

Italy

80

40

What is the opportunity cost for each country to produce more olives?

a)

Greece .333 bushels of grapes; Italy 2 bushels of grapes

b)

Greece 3 bushels of grapes; Italy 0.5 bushels of grapes

c)

Greece 3 bushels of olives; Italy 0.5 bushels of olives

d)

Greece .333 bushels of olives; Italy 2 bushels of olives

66.

Below are the number of bushels of olives and grapes that a single farmer can produce in Greece and Italy.

Country

Olives

Grapes

Greece

20

60

Italy

80

40

What is the opportunity cost for each country to produce more grapes?

a)

Greece .333 bushels of grapes; Italy 2 bushels of grapes

b)

Greece 3 bushels of grapes; Italy 0.5 bushels of grapes

c)

Greece 3 bushels of olives; Italy 0.5 bushels of olives

d)

Greece .333 bushels of olives; Italy 2 bushels of olives

67.

Below are the number of bushels of olives and grapes that a single farmer can produce in Greece and Italy.

Country

Olives

Grapes

Greece

20

60

Italy

80

40

Which country has the absolute advantage in olive production?

a)

Greece

b)

Italy

c)

Neither

d)

Both

68.

Below are the number of bushels of olives and grapes that a single farmer can produce in Greece and Italy.

Country

Olives

Grapes

Greece

20

60

Italy

80

40

Which country has the absolute advantage in grape production?

a)

Greece

b)

Italy

c)

Neither

d)

Both

69.

Below are the number of bushels of olives and grapes that a single farmer can produce in Greece and Italy.

Country

Olives

Grapes

Greece

20

60

Italy

80

40

Which country has the comparative advantage in olive production?

a)

Greece

b)

Italy

c)

Neither

d)

Both

70.

Below are the number of bushels of olives and grapes that a single farmer can produce in Greece and Italy.

Country

Olives

Grapes

Greece

20

60

Italy

80

40

Which country has the comparative advantage in grape production?

a)

Greece

b)

Italy

c)

Neither

d)

Both

71.

Below are the weekly output capacities for Canada and Venezuela in lumber and Oil.

Country

Oil (barrels)

Lumber (tons)

Canada

20

40

Venezuela

60

20

What is the opportunity cost for each country to produce more oil?

a)

Canada 0.5 oil; Venezuela 3 oil

b)

Canada 2 lumber; Venezuela .33 lumber

c)

Canada 0.5 lumber; Venezuela .33 lumber

d)

Canada 2 oil; Venezuela .33 oil

72.

Below are the weekly output capacities for Canada and Venezuela in lumber and oil.

Country

Oil (barrels)

Lumber (tons)

Canada

20

40

Venezuela

60

20

What is the opportunity cost for each country to produce more lumber?

a)

Canada 0.5 oil; Venezuela 3 oil

b)

Canada 2 lumber; Venezuela .33 lumber

c)

Canada 0.5 lumber; Venezuela .33 lumber

d)

Canada 2 oil; Venezuela .33 oil

73.

Below are the weekly output capacities for Canada and Venezuela in lumber and oil.

Country

Oil (barrels)

Lumber (tons)

Canada

20

40

Venezuela

60

20

Which country has the absolute advantage in oil production?

a)

Canada

b)

Venezuela

c)

Both

d)

Neither

74.

Below are the weekly output capacities for Canada and Venezuela in lumber and oil.

Country

Oil (barrels)

Lumber (tons)

Canada

20

40

Venezuela

60

20

Which country has the absolute advantage in lumber production?

a)

Canada

b)

Venezuela

c)

Both

d)

Neither

75.

Below are the weekly output capacities for Canada and Venezuela in lumber and oil.

Country

Oil (barrels)

Lumber (tons)

Canada

20

40

Venezuela

60

20

Which country has the comparative advantage in oil production?

a)

Canada

b)

Venezuela

c)

Both

d)

Neither

76.

Below are the weekly output capacities for Canada and Venezuela in lumber and oil.

Country

Oil (barrels)

Lumber (tons)

Canada

20

40

Venezuela

60

20

Which country has the comparative advantage in lumber production?

a)

Canada

b)

Venezuela

c)

Both

d)

Neither

ECON_2105_20_MC

Total questions: 76

Worksheet time: 38mins

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