11) If Argentina has an absolute advantage in the production of beef and Guatemala has an absolute advantage in the production of bananas, then
A) it is reasonable to expect that specialization and trade will benefit both countries.
B) it is reasonable to expect that specialization will benefit both countries, but trade will not.
C) neither country has anything to gain from specialization and trade.
D) it is reasonable to expect that trade will benefit both countries, but specialization will not.
12) If Mexico has a comparative advantage in the production of oil compared to France, then
A) Mexico also has an absolute advantage in the production of oil.
B) France has an absolute advantage in the production of oil.
C) Mexico can produce oil at a lower opportunity cost than France.
D) France cannot produce oil.
13) The Dominican Republic has a comparative advantage in the production of tobacco, and Panama has a comparative advantage in the production of oranges. If both countries specialize based on the theory of comparative advantage
A) only the production of tobacco will increase.
B) only the production of both goods will increase.
C) only the consumption of both goods will increase.
D) the production and consumption of both goods will increase.
14) Suppose that Greece and Portugal are both engaged in the production of grapes and figs, and that Greece has an absolute advantage in the production of both goods. If Portugal has a lower opportunity cost for producing figs, then
A) Portugal has a comparative advantage in the production of figs, but it is outweighed by Portugal's absolute advantage in fig production.
B) Greece has a comparative advantage in the production of both goods.
C) Portugal has a comparative advantage in fig production, but there will be no gains from specialization and trade.
D) Portugal has a comparative advantage in the production of figs, and specialization and trade between the two countries can be mutually beneficial.
15) If the slopes of the production possibility frontiers involving corn and wheat in the United States and Canada are equal,
A) the opportunity cost of producing corn is less in the United States.
B) the opportunity cost of producing wheat is less in Canada.
C) specialization does not benefit either country.
D) equal amounts of corn and wheat will be produced in both countries.
16) Suppose that Paraguay and Guyana are both engaged in the production of soybeans and grapefruit, and that Paraguay has an absolute advantage in the production of both goods. If Guyana has a comparative advantage in the production of soybeans, then Guyana
A) has a higher opportunity cost for soybeans, which means it should specialize in the production of grapefruit and engage in trade.
B) has a lower opportunity cost for producing soybeans, but specialization is not feasible because Paraguay has a lower monetary cost of soybean production.
C) has a lower opportunity cost for soybeans, which means that it should specialize in production of soybeans and engage in trade.
D) should continue to produce soybeans, but only for domestic consumption, because trade is not a viable option.
Refer to the information provided in Table 19.1 below to answer the questions that follow.
Table 19.1
GermanyChile
BeerWineBeerWine
(cases) (cases) (cases)(cases)
75030 0
60152412
453018 24
304512 36
1560 6 48
0 75 0 60
17) Refer to Table 19.1. In Germany, the opportunity cost of 1 case of wine is
A) 1/2 case of beer.
B) 1 case of beer.
C) 2 cases of beer.
D) 5 cases of beer.
18) Refer to Table 19.1. In Chile, the opportunity cost of 1 case of beer is
A) 1/2 case of wine.
B) 1 case of wine.
C) 2 cases of wine.
D) 4 cases of wine.
19) Refer to Table 19.1. In Germany, the opportunity cost of 1 case of beer is
A) 1/2 case of wine.
B) 1 case of wine.
C) 2 cases of wine.
D) 5 cases of wine.
20) Refer to Table 19.1. In Chile, the opportunity cost of 1 case of wine is
A) 1/2 case of beer.
B) 1 case of beer.
C) 2 cases of beer.
D) 4 cases of beer.
