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Exam 2: Specialization and Exchange

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Question 1

Multiple Choice

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Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.On the other hand,a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day.When trade opens up,the United States should produce:

A) both goods, since they have an absolute advantage in both goods, and not trade.
B) only shoes, since they have a comparative advantage in the production of shoes, and not trade.
C) apples, since they have a comparative advantage in the production of apples, and not trade.
D) only apples, since they have a comparative advantage in the production of apples, and trade for shoes.

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Question 2

Multiple Choice

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Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.The opportunity cost of one tomato in Country A is:

A) 100 bananas.
B) 20 bananas.
C) 5 bananas.
D) 4 bananas.

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Question 3

Multiple Choice

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Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.The opportunity cost of one tomato in Country B is:

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day.On the other hand,a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day.The opportunity cost for the United States is:

Refer to the figure shown,which represents the production possibilities frontiers for Countries A and B.Considering both country's production possibilities frontiers,we know that would both agree to terms of trade of one truck to:

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.Country A would be using resources efficiently if it produced:

Consider the production possibilities frontier displayed in the figure shown.Which of the following combinations could not be produced?

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day.On the other hand,a Bangladeshi worker can produce 100 pairs of gloves or grow 200 radishes per day.Using the concepts of absolute and comparative advantage,we can say that the United States has the comparative advantage in:

When a producer has an absolute advantage at producing a good,it means the producer:

Tom and Jerry have two tasks to do all day: make dishes and build fences.If Tom spends all day making dishes,he will have make 16 dishes.If he instead devotes his day to building fences,Tom will build 4 fences.If Jerry spends his day making dishes,he will make 14 dishes; if he spends the day building fences,he will build 7 fences.Based on their production possibilities frontiers,Tom and Jerry:

Hurricane Katrina destroyed much of New Orleans and other parts of the South.Which of the following statements is true? The hurricane:

Refer to the figure shown,which represents the production possibilities frontiers for Countries A and B.One of the reasons why Country A and Country B are not realistic representations of actual countries is:

Consider the production possibilities frontier in the figure shown.As more and more cigars are produced the opportunity cost of producing more cigars:

Economic theory states that losing comparative advantage in one good means creating a comparative advantage in another.This suggests that:

Refer to the figure shown,which represents the production possibilities frontiers for Countries A and B.Considering both country's production possibilities frontiers,we can conclude that Country B will specialize in:

Choosing to produce at any point within a production possibilities frontier is:

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.Suppose Country B's population of workers increased to 600.We can say:

Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year.Country A has 200 workers.Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year.Country B has 400 workers.Suppose Country A specializes in bananas,and Country B specializes in tomatoes.The limits to the terms of trade that Country A would find acceptable are Country A will give no:

Suppose an American worker can make 100 chairs or catch 900 fish per day.On the other hand,a Chilean worker,can make 40 chairs or catch 400 fish per day.The United States has an absolute advantage in the production of both fish and chairs.This means that the United States:

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year.Country A has 100 workers.Suppose a worker in Country B can make either 2 iPods or 10 tablets each year.Country B has 200 workers.Suppose Country B's population of workers increased to 600.Which of the following statements is now true?