CHAPTER 2- MC Practice

Select the correct definition of the term "comparative advantage."

the ability to produce a good or service at a lower opportunity cost than another

the ability to produce more of a good or service than another over a specified time period

the ability to produce less of a good or service than another over a specified time period

the ability to produce a good or service at a higher opportunity cost than another

a nation offering more favorable trade policy with its allies than with other countries
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Select the correct definition of the term "comparative advantage."

the ability to produce a good or service at a lower opportunity cost than another

the ability to produce more of a good or service than another over a specified time period

the ability to produce less of a good or service than another over a specified time period

the ability to produce a good or service at a higher opportunity cost than another

a nation offering more favorable trade policy with its allies than with other countries
the ability to produce a good or service at a lower opportunity cost than another
When trading with more developed countries,

less developed countries do not have a comparative advantage in the production of any goods or services.

less developed countries have a comparative advantage in the production of some goods or services.

less developed countries have a comparative advantage in the production of all goods or services.
less developed countries have a comparative advantage in the production of some goods or services.
Identify the statement as true or false.

a. When two countries choose to partake in international trade, it is a mutually beneficial activity for both countries.
true
Identify the statement as true or false.

b. Wealthier countries always benefit more from international trade than poorer countries.
false
Identify the statement as true or false.

c. Countries trade for goods in which they do not have a comparative advantage, and therefore, would never trade with nations that have similar resource endowments.
false
Identify the statement as true or false.

d. Through specialization and trade, it is possible for a country to consume a combination of goods that is beyond its original production possibilities frontier.
true
A farmer produces both beans and corn on her farm. If she must give up 16 bushels of corn to be able to get 6 bushels of beans, then her opportunity cost of 1 bushel of beans is

2.99 bushels of corn.
16.00 bushels of corn.
2.67 bushels of corn.
0.38 bushels of corn.
2.67 bushels of corn.
Why is the shape of the production possibilities frontier (PPF) often curved instead of straight?

The productive efficiency of an economy decreases as it moves from left to right along the PPF.

Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.

Because the production possibilities frontier is based on the productive capabilites, and of a nation overall, rather than the productive capacity of an individual.

To take a potential sunk cost into account, the PPF is curved to distribute the burden of the sunk cost based on allocative effieciency.
Typically, some resources are better suited for producing one good than another, which means that there are diminishing returns when moving such resources away from producing what they are best suited for.
Determine if the item represents an example of positive economics or normative economics.

The richest 1% of Americans should pay more taxes than the rest of the 99%.

normative economics
positive economics
normative economics
Determine if the item represents an example of positive economics or normative economics.

A decrease in the supply of coconut will increase the price of German chocolate cake, a good which requires coconut shavings as a key ingredient.

positive economics
normative economics
positive economics
Determine if the item represents an example of positive economics or normative economics. As minimum wage increases, the prices of all goods and services also tends to increase. normative economics positive economicspositive economicsDetermine if the item represents an example of positive economics or normative economics. Social welfare spending in Sweden occupies too large a portion of the national budget. normative economics positive economicsnormative economicsThe table presents information about the productivity of digital cameras and personal computers in the United States and Japan. The data are presented in units of output per hour of work. Use this information to answer the question. Japan United States Digital cameras 6 3 Personal computers 8 2 Japan has a(n) ___________________ advantage in producing ______________________. comparative, digital cameras and personal computers absolute, personal computers comparative, digital cameras absolute, digital camerasabsolute, personal computersIn a competitive market, all of the choices along the production possibility frontier display ________________ efficiency, while the specific choice on the frontier that society picks is the one with _______________ efficiency. allocative; allocative productive; productive productive; allocative allocative; productiveproductive; allocativeAn economic transaction in which one party trades a good or service for another good or services is called a production possibility. comparative advantage. barter. absolute advantage.barter.Suppose that Paulie and Vinny each can produce ice cream or t-shirts. The table shows the quantity of each good that Paulie and Vinny each can produce in 1 hour, respectively, if they devote all of their time and effort into making the good. Round all answers to two decimal places. Paulie Vinny Ice cream (cups) 5.00 20.00 T-shirts (quantity) 6.00 13.00 a. What is Paulie's opportunity cost of producing a cup of ice cream? b. What is Vinny's opportunity cost of producing a t-shirt? c. Paulie has a comparative advantage in _________________ and Vinny has a comparative advantage in _________________Paulie's opportunity cost: 4 t‑shirts Vinny's opportunity cost: 0.46 cups of ice cream t-shirts, ice creamLabel each component of the circular flow diagram.Markets for Goods and services takes in money and produces goods and services while markets for factors of production take in money and output factors.