Economics Principles, Applications And Tools 8th Edition by Arthur O’Sullivan –Test Bank

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):
5. A) market advantage.
6. B) comparative advantage.
7. C) absolute advantage.
8. 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.
9. A) an absolute
10. B) an absolute and a comparative
11. C) a comparative
12. 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.
13. A) an absolute
14. B) an absolute and a comparative
15. C) a comparative
16. 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?
17. A) Joe
18. B) both Bob and Joe
19. C) Bob
20. 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?
21. A) Joe
22. B) both Bob and Joe
23. C) Bob
24. 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:
25. A) 3 apples.
26. B) 4 apples.
27. C) 6 apples.
28. 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:
29. A) 1 carrot.
30. B) 4 carrots.
31. C) 6 carrots.
32. 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:
33. A) 3 apples.
34. B) 4 apples.
35. C) 6 apples.
36. 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:
37. A) 1 carrot.
38. B) 2/3 carrot.
39. C) 4 carrots.
40. 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:
41. A) Willy should specialize in carrots and trade for apples.
42. B) Willy should specialize in apples and trade for carrots.
43. C) Blithe should specialize in both goods.
44. D) Willy should specialize in both goods.
    Answer: A