Economics Principles, Applications And Tools 8th Edition by Arthur O’Sullivan – Test Bank
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Sample
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Macroeconomics: Prin., Apps, & Tools, 8e (O’Sullivan)
TB2
Chapter 3 Exchange and Markets
3.1 Comparative Advantage and Exchange
1) The ability of one person or nation to produce a good at a
lower opportunity cost than another is called a(n):
1. A)
market advantage.
2. B)
comparative advantage.
3. C)
absolute advantage.
4. D)
specialization advantage.
Answer: B
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
2) The ability of one person or nation to produce a good at a
lower resource cost than another is called a(n):
1. A)
market advantage.
2. B)
comparative advantage.
3. C)
absolute advantage.
4. D)
specialization advantage.
Answer: C
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
3) Suppose Bob can produce more jeans than Joe in a day. Bob has
________ advantage over Joe in sewing jeans.
1. A) an
absolute
2. B) an
absolute and a comparative
3. C) a
comparative
4. D)
neither an absolute nor a comparative
Answer: A
Diff: 1
Topic: Specialization and the Gains from Trade
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market systems
and the gains that can be made from trade.
4) Suppose that in the time it takes for him to bake a cake, Bob
can sew 5 pairs of jeans. In the time it takes for Joe to bake a cake, he can
sew 8 pairs of jeans day. In this example, Bob has ________ advantage over Joe
in cake baking.
1. A) an
absolute
2. B) an
absolute and a comparative
3. C) a
comparative
4. D)
neither an absolute nor a comparative
Answer: C
Diff: 1
Topic: Specialization and the Gains from Trade
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
5) Suppose that in the time it takes for him to bake a cake, Bob
can sew 5 pairs of jeans. In the time it takes for Joe to bake a cake, he can
sew 8 pairs of jeans day. In this example, who has the comparative advantage in
baking a cake?
1. A)
Joe
2. B)
both Bob and Joe
3. C)
Bob
4. D)
neither Bob nor Joe
Answer: C
Diff: 1
Topic: Specialization and the Gains from Trade
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
6) Suppose that in the time it takes for him to bake a cake, Bob
can produce sew 5 pairs of jeans. In the time it takes for Joe to bake a cake,
he can produce sew 8 pairs of jeans day. In this example, who has the absolute
advantage in baking a cake?
1. A)
Joe
2. B)
both Bob and Joe
3. C)
Bob
4. D)
There is insufficient information to answer this question.
Answer: D
Diff: 1
Topic: Specialization and the Gains from Trade
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
Table 3.1
7) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. Based on the table, Blythe’s opportunity cost of 1
carrot is:
1. A) 3
apples.
2. B) 4
apples.
3. C) 6
apples.
4. D)
1.5 apples.
Answer: A
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
8) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. Based on the table, Blythe’s opportunity cost of 1
apple is:
1. A) 1
carrot.
2. B) 4
carrots.
3. C) 6
carrots.
4. D)
1/3 carrot.
Answer: D
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
9) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. Based on the table, Willy’s opportunity cost of 1
carrot is:
1. A) 3
apples.
2. B) 4
apples.
3. C) 6
apples.
4. D)
1.5 apples.
Answer: D
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
10) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. Based on the table, Willy’s opportunity cost of 1 apple
is:
1. A) 1
carrot.
2. B)
2/3 carrot.
3. C) 4
carrots.
4. D) 6
carrots.
Answer: B
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
11) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. From the table, we can conclude that:
1. A)
Willy should specialize in carrots and trade for apples.
2. B)
Willy should specialize in apples and trade for carrots.
3. C)
Blithe should specialize in both goods.
4. D)
Willy should specialize in both goods.
Answer: A
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
12) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. From the table, we can conclude that:
1. A)
Blythe should specialize in carrots and trade for apples.
2. B)
Blythe should specialize in apples and trade for carrots.
3. C)
Blythe should specialize in both goods.
4. D)
Willy should specialize in both goods.
Answer: B
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
13) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. From the table, we can conclude that:if Willy and
Blythe choose to specialize and trade, then:
1. A)
Willy will specialize in apples and trade apples for carrots.
2. B)
Willy will specialize in carrots and trade carrots for apples.
3. C)
Blythe will specialize in carrots and trade carrots for apples.
4. D)
None of the above; specialization and trade are not beneficial for Willy and
Blythe.
Answer: B
Diff: 2
Topic: Specialization and the Gains from Trade
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
14) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. From the table, we can conclude that:
1. A)
Willy has an absolute advantage in producing apples but not carrots.
2. B)
Willy has an absolute advantage in producing carrots but not apples.
3. C)
Willy has an absolute advantage in producing both goods.
4. D)
Willy does not have an absolute advantage in producing either good.
Answer: C
Diff: 2
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
15) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. From the table, we can conclude that:
1. A)
Willy has a comparative advantage in producing apples but not carrots.
2. B)
Willy has a comparative advantage in producing carrots but not apples.
3. C)
Willy has a comparative advantage in producing both goods.
4. D)
Willy does not have a comparative advantage in producing either good.
Answer: B
Diff: 2
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
16) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. From the table, we can conclude that:
1. A)
Willy has both an absolute and comparative advantage in apple production.
2. B)
Willy has both an absolute and comparative advantage in carrot production.
3. C)
Willy has neither an absolute nor comparative advantage in apple production.
4. D)
Willy has neither an absolute nor a comparative advantage in carrot production.
Answer: B
Diff: 2
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
17) Table 3.1 illustrates Willy and Blythe’s hourly production
for apples and carrots. From the table, we can conclude that:
1. A)
Blythe has an absolute advantage in producing apples but not carrots.
2. B)
Blythe has an absolute advantage in producing carrots but not apples.
3. C)
Blythe has an absolute advantage in producing both goods.
4. D)
Blythe has an absolute advantage in producing neither good.
Answer: D
Diff: 1
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
Table 3.2
18) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2.
Rose’s opportunity cost of producing 1 coconut is:
1. A)
1/3 fish.
2. B) 1
1/2 fish.
3. C) 3
fish.
4. D) 6
fish.
Answer: A
Diff: 1
Topic: Comparative Advantage and Exchange
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market systems
and the gains that can be made from trade.
19) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2.
Sharon’s opportunity cost of producing 1 coconut is:
1. A)
3/4 fish.
2. B) 1
1/3 fish.
3. C) 3
fish.
4. D) 4
fish.
Answer: B
Diff: 1
Topic: Comparative Advantage and Exchange
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
20) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2.
Rose’s opportunity cost of producing 1 fish is:
1. A)
1/3 coconut.
2. B) 1
1/2 coconuts.
3. C) 3
coconuts.
4. D) 6
coconuts.
Answer: C
Diff: 1
Topic: Comparative Advantage and Exchange
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
21) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2.
Which of the following is true?
1. A)
Rose has a comparative advantage in producing coconuts but not fish.
2. B)
Rose has a comparative advantage in producing fish but not coconuts.
3. C)
Rose has a comparative advantage in producing both goods.
4. D)
Rose does not have a comparative advantage in producing either good.
Answer: A
Diff: 1
Topic: Comparative Advantage and Exchange
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
22) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2. Sharon’s
opportunity cost of producing 1 fish is:
1. A)
3/4 coconut.
2. B) 1
1/3 coconuts.
3. C) 3
coconuts.
4. D) 4
coconuts.
Answer: A
Diff: 1
Topic: Comparative Advantage and Exchange
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
23) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2.
Which of the following is true?
1. A)
Rose has an absolute advantage in producing coconuts but not fish.
2. B)
Rose has an absolute advantage in producing fish but not coconuts.
3. C)
Rose has an absolute advantage in producing both goods.
4. D)
Rose does not have an absolute advantage in producing either good.
Answer: A
Diff: 2
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
24) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2.
Which of the following is true?
1. A)
Rose has both an absolute and comparative advantage in coconut production.
2. B)
Rose has both an absolute and comparative advantage in fish production.
3. C)
Rose has neither an absolute nor comparative advantage in coconut production.
4. D)
Rose has neither an absolute nor a comparative advantage in fish production.
Answer: A
Diff: 2
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
25) Consider two individuals, Rose and Sharon, who produce fish
and coconuts. Rose and Sharon’s hourly productivity are shown in Table 3.2.
Which of the following is true?
1. A)
Sharon has an absolute advantage in producing coconuts but not fish.
2. B)
Sharon has an absolute advantage in producing fish but not coconuts.
3. C)
Sharon has an absolute advantage in producing both goods.
4. D)
Sharon does not have an absolute advantage in producing either good.
Answer: B
Diff: 1
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
26) Producer A has a comparative advantage over Producer B if,
in producing a good:
1. A) A
can produce more of the good than B can in a given time period.
2. B) A
has a lower opportunity cost of producing the good than does B.
3. C) A
has to trade off more than B does to produce the good.
4. D) A
has a higher opportunity cost of producing the good than does B.
Answer: B
Diff: 2
Topic: Comparative Advantage and Exchange
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
Table 3.3
27) Consider two individuals, Bob and Jerry, who produce guitars
and banjos. Bob and Jerry’s weekly productivity are shown in Table 3.3. Which
of the following is true?
1. A)
Bob has a comparative advantage in producing guitars but not banjos.
2. B)
Bob has a comparative advantage in producing banjos but not guitars.
3. C)
Bob has a comparative advantage in producing both goods.
4. D)
Bob does not have a comparative advantage in producing either good.
Answer: D
Diff: 3
Topic: Comparative Advantage and Exchange
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
28) Consider two individuals, Bob and Jerry, who produce guitars
and banjos. Bob and Jerry’s weekly productivity are shown in Table 3.3. Which
of the following is true?
1. A)
Bob has an absolute advantage in producing both goods, and a comparative
advantage in producing guitars.
2. B)
Bob has an absolute advantage in producing both goods, and a comparative
advantage in producing banjos.
3. C)
Bob has an absolute and a comparative advantage in producing both goods.
4. D)
Bob has an absolute advantage in producing both goods, but no one has a
comparative advantage in producing either good.
Answer: D
Diff: 3
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Analytical
AACSB: Analytic Skills
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
29) The ability of one person or nation to produce a good at a
lower absolute cost than another is called a(n):
1. A)
market advantage.
2. B)
comparative advantage.
3. C)
absolute advantage.
4. D)
specialization advantage.
Answer: C
Diff: 1
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
30) An individual or country that has a comparative advantage in
the production of one good:
1. A)
must have an absolute advantage in the good’s production.
2. B)
must not have an absolute advantage in the good’s production.
3. C) may
or may not have an absolute advantage in the good’s production.
4. D)
must not have an absolute advantage in the production of the other good.
Answer: C
Diff: 2
Topic: Comparative Advantage Versus Absolute Advantage
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
31) A rich nation will trade with a poor nation because the:
1. A)
rich nation has the absolute advantage in all products.
2. B)
poor nation has the absolute advantage in all products.
3. C)
poor nation has the comparative advantage in a product.
4. D)
rich nation has the comparative advantage in all products.
Answer: C
Diff: 2
Topic: Comparative Advantage and International Trade
Skill: Conceptual
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
32) For country A, an export is a good produced in:
1. A)
country B and purchased by residents of country B.
2. B)
country B and purchased by residents of country A.
3. C)
country A and purchased by residents of country B.
4. D)
country A and purchased by residents of country A.
Answer: C
Diff: 1
Topic: Comparative Advantage and International Trade
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
33) For country A, an import is a good produced in:
1. A)
country B and purchased by residents of country B.
2. B)
country B and purchased by residents of country A.
3. C)
country A and purchased by residents of country B.
4. D)
country A and purchased by residents of country A.
Answer: B
Diff: 1
Topic: Comparative Advantage and International Trade
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
34) A product produced in a foreign country and purchased by
residents of the home country is:
1. A) an
export.
2. B) an
import.
3. C) savings.
4. D)
investment.
Answer: B
Diff: 1
Topic: Comparative Advantage and International Trade
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
35) A product produced in the home country and sold in another
country is:
1. A) an
export.
2. B) an
import.
3. C)
savings.
4. D)
investment.
Answer: A
Diff: 1
Topic: Comparative Advantage and International Trade
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
36) Suppose a car is completely produced and assembled in
Germany and is sold to the United States. In this example, the country that
imports the car is ________ while the country that exports the car is ________.
1. A)
the United States; Germany
2. B)
Germany; the United States
3. C)
Germany; Germany
4. D)
the United States; the United States
Answer: A
Diff: 1
Topic: Outsourcing
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
37) Suppose a car is completely produced and assembled in
Germany and is sold to the United States. In this example, if the United States
restricts the purchase of the car from Germany, then the country whose overall
welfare would be reduced by this policy would be:
1. A)
the United States.
2. B)
Germany.
3. C)
neither Germany nor the United States.
4. D)
both Germany and the United States.
Answer: D
Diff: 1
Topic: Outsourcing
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
38) ________ occurs when a firm is shifting part of its production
to another country.
1. A)
Outsourcing
2. B)
Importing
3. C)
Exporting
4. D)
All of the above are correct.
Answer: A
Diff: 1
Topic: Outsourcing
Skill: Definition
AACSB: Reflective Thinking
Learning Outcome: Discuss different types of market
systems and the gains that can be made from trade.
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