31.Theprincipleofcomparativeadvantagedoesnotprovideanswerstocertainquestions.Oneofthosequestionsis
a.Isitpossibleforspecializationandtradetobenefitmorethanonepartytoatrade?
b.Isitpossibleforspecializationandtradetoincreasetotaloutputoftradedgoods?
c.Doopportunitycostsplayaroleinpeople’sdecisionstospecializeincertainactivities?
d.Whatdeterminesthepriceatwhichtradetakesplace?
32.Whichofthefollowingisnotcorrect?
a.Theproducerwhorequiresasmallerquantityofinputstoproduceagoodissaidtohaveanabsoluteadvantageinproducingthatgood.
b.TheproducerwhogivesuplessofothergoodstoproduceGoodXhasthesmalleropportunitycostofproducingGoodX.
c.Theproducerwhohasthesmalleropportunitycostofproducingagoodissaidtohaveacomparativeadvantageinproducingthatgood.
d.Thegainsfromspecializationandtradearebasednotoncomparativeadvantagebutonabsoluteadvantage.
33.SupposethataworkerinCornlandcangroweither40bushelsofcornor10bushelsofoatsperyear,andaworkerinOatlandcangroweither20bushelsofcornor5bushelsofoatsperyear.Thereare20workersinCornlandand20workersinOatland.Whichofthefollowingstatementsistrue?
a.Bothcountriescouldgainfromtradewitheachother.
b.NeithercountrycouldgainfromtradewitheachotherbecauseCornlandhasanabsoluteadvantageinbothgoods.
c.Neithercountrycouldgainfromtradewitheachotherbecauseneitheronehasacomparativeadvantage.
d.Oatlandcouldgainfromtradebetweenthetwocountries,butCornlanddefinitivelywouldlose.
34.SupposethatthecountryofXenophobiachosetoisolateitselffromtherestoftheworld.ItsrulerproclaimedthatXenophobiashouldbecomeself-sufficient,soitwouldnotengageinforeigntrade.Fromaneconomicperspective,thisideawould
a.makesenseifXenophobiahadanabsoluteadvantageinallgoods.
b.makesenseifXenophobiahadnoabsoluteadvantagesinanygood.
c.notmakesenseaslongasXenophobiahadacomparativeadvantageinsomegood.
d.notmakesenseaslongasXenophobiahadanabsoluteadvantageinatleasthalfthegoodsthatcouldbetraded.
35.Specializationandtradearecloselylinkedto
a.absoluteadvantage.
b.comparativeadvantage.
c.gainstosometradersthatexactlyoffsetlossestoothertraders.
d.shrinkageoftheeconomicpie.
36.Wheneachpersonspecializesinproducingthegoodinwhichheorshehasacomparativeadvantage,totalproductionintheeconomy
a.falls.
b.staysthesame.
c.rises.
d.mayfall,rise,orstaythesame.
37.Totaloutputinaneconomyincreaseswheneachpersonspecializesbecause
a.thereislesscompetitionforthesameresources.
b.eachpersonspendsmoretimeproducingthatproductinwhichheorshehasacomparativeadvantage.
c.awidervarietyofproductswillbeproducedwithineachcountryduetospecialization.
d.governmentnecessarilyplaysalargerroleintheeconomyduetospecialization.
38.Whichofthefollowingstatementsisnotcorrect?
a.Tradeallowsforspecialization.
b.Tradehasthepotentialtobenefitallnations.
c.Tradeallowsnationstoconsumeoutsideoftheirproductionpossibilitiescurves.
d.Absoluteadvantageisthedrivingforceofspecialization.
39.AssumethatGreecehasacomparativeadvantageinfishandGermanyhasacomparativeadvantageincars.AlsoassumethatGermanyhasanabsoluteadvantageinbothfishandcars.Ifthesetwocountriesspecializeandtradesoastomaximizethebenefitsofspecializationandtrade,then
a.thetwocountries’combinedoutputofbothgoodswillbehigherthanitwouldbeintheabsenceoftrade.
b.Greecewillproducemorefishthanitwouldproduceintheabsenceoftrade.
c.Germanywillproducemorecarsthanitwouldproduceintheabsenceoftrade.
d.Alloftheabovearecorrect.
40.SupposethataworkerinRadiolandcanproduceeither4radiosor1televisionperyearandaworkerinTeeveelandcanproduceeither2radiosor5televisionsperyear.Eachnationhas100workers,andeachcountryspecializesaccordingtotheprincipleofcomparativeadvantage.IfRadiolandtrades100televisionstoTeeveelandinexchangefor100radioseachyear,theneachcountry’smaximumconsumptionofnewradiosandtelevisionsperyearwillbe
a.higherthanitwouldbeintheabsenceoftradebecauseofthegainsfromtrade.
b.thesameasitwouldbeintheabsenceoftrade.
c.lessthanitwouldbeintheabsenceoftradebecauseneithercountryisspecializingintheproductinwhichithasacomparativeadvantage.
d.lessthanitwouldbeintheabsenceoftradebecauseTeeveelandhasanabsoluteadvantageinbothgoodsandsoitcannotbenefitbytradingwithRadioland.
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