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

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):

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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.

Passing Grades

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?
5. A) Joe
6. B) both Bob and Joe
7. C) Bob
8. 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?
9. A) Joe
10. B) both Bob and Joe
11. C) Bob
12. 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.