Chapter 3 Interdependence and the Gains from Trade

Test A
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A countrys consumption possibilities frontier can be outside its production possibilities frontier a. with trade. b. by allocating resources differently. c. by lowering unemployment in the country. d. by producing a greater variety of goods and services. ANSWER a. with trade. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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(f labor in $e.ico is less productive than labor in the /nited States in all areas of production0 a. neither nation can benefit from trade. b. $e.ico can benefit from trade but the /nited States cannot. c. both nations can benefit from trade. d. $e.ico will not have a comparative advantage in any good. ANSWER c. both nations can benefit from trade. !"#E $ %E"1 & SE'!()N - )*+E'!(,E 1 RAN&)$ " 1abor 2ours Needed to $a3e 1 #ound of $eat #otatoes 14 6 7 1 #ounds produced in -4 hours $eat #otatoes 7 6 -4

5armer Rancher
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Refer to the table shown. 5or the 5armer0 the opportunity cost of 1 pound of meat is a. 19- pound of potatoes b. - pounds of potatoes. c. 7 hours of labor. d. : hours of labor. ANSWER b. - pounds of potatoes. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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Refer to the table shown. 5or the Rancher0 the opportunity cost of 1 pound of meat is a. 1 hour of labor. b. 6 hours of labor. c. 7 pounds of potatoes. d. 197 pound of potatoes. ANSWER c. 7 pounds of potatoes. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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Refer to the table shown. 5or the 5armer0 the opportunity cost of 1 pound of potatoes is a. 19- pound of meat. b. - pounds of meat. c. 7 hours of labor. d. : hours of labor. ANSWER a. 19- pound of meat. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "

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-- 'hapter 89(nterdependence and the <ains from !rade

Refer to the table shown. 5or the Rancher0 the opportunity cost of 1 pound of potatoes is a. 7 hours of labor. b. - hours of labor. c. 7 pounds of meat. d. 197 pound of meat. ANSWER d. 197 pound of meat. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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Refer to the table shown. !he 5armer has an absolute advantage in ?????? and the Rancher has an absolute advantage in ??????. a. meat0 meat b. meat0 potatoes c. potatoes0 meat d. neither good0 both goods ANSWER d. neither good0 both goods !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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Refer to the table shown. !he Rancher has a comparative advantage in ?????? and the 5armer has a comparative advantage in ??????. a. meat0 potatoes b. both goods0 neither good c. potatoes0 meat d. neither good0 both goods ANSWER c. potatoes0 meat !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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Refer to the table shown. !he 5armer and Rancher both could benefit by the 5armer specialiAing in ?????? and the Rancher specialiAing in ??????. a. potatoes0 meat b. meat0 potatoes c. neither good0 meat d. !hey cannot benefit by specialiAation and trade. ANSWER b. meat0 potatoes !"#E $ %E"1 ! SE'!()N - )*+E'!(,E 8 (NS!R/'!()N 1 RAN&)$ "

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'hapter 89(nterdependence and the <ains from !rade -8 !hese figures illustrate the production possibilities available to !om and Nicole with 74 hours of labor.

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Refer to the graphs shown. !he opportunity cost of 1 video for !om is a. 19- boo3. b. 1 boo3. c. - boo3s. d. 7 boo3s. ANSWER a. 19- boo3. !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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Refer to the graphs shown. !he opportunity cost of 1 video for Nicole is a. 1974 boo3. b. 19: boo3. c. : boo3s. d. 74 boo3s. ANSWER c. : boo3s. !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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Refer to the graphs shown. !he opportunity cost of 1 boo3 for Nicole is a. 1974 video. b. 19: video. c. 6 videos. d. : videos. ANSWER b. 19: video. !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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Refer to the graphs shown. !he opportunity cost of 1 boo3 for !om is a. 197 video. b. 19- video. c. - videos. d. 7 videos. ANSWER c. - videos !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N

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-7 'hapter 89(nterdependence and the <ains from !rade

Refer to the graphs shown. Nicole has an absolute advantage in ?????? and !om has an absolute advantage in ??????. a. boo3s0 videos b. videos0 boo3s c. both goods0 neither good d. neither good0 both goods ANSWER c. both goods0 neither good !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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Refer to the graphs shown. Nicole has a comparative advantage in ?????? and !om has a comparative advantage in ??????. a. boo3s0 videos b. both goods0 neither good c. videos0 boo3s d. neither good0 boo3s ANSWER a. boo3s0 videos !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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Refer to the graphs shown. Nicole should specialiAe in ?????? and !om should specialiAe in ??????. a. videos0 boo3s b. boo3s0 videos c. both goods0 videos d. boo3s0 neither good ANSWER b. boo3s0 videos !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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Refer to the graphs shown. (f !om and Nicole both specialiAe in the good in which they have a comparative advantage0 total production of boo3s will be ?????? and total production of videos will be ??????. a. 7-0 @ b. 740 7 c. 70 74 d. @0 7ANSWER b. 740 7 !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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'omparative advantage is based on a. capital costs. b. labor costs. c. dollar price. d. opportunity costs. ANSWER d. opportunity costs. !"#E $ %E"1 & SE'!()N - )*+E'!(,E 8 RAN&)$ "
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Absolute advantage is found by a. comparing opportunity costs. b. calculating the dollar cost of production. c. first determining which country has a comparative advantage. d. comparing the productivity of one nation to that of another. ANSWER d. comparing the productivity of one nation to that of another. !"#E $%E"1 & SE'!()N - )*+E'!(,E 8 RAN&)$ "

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'hapter 89(nterdependence and the <ains from !rade -6

!he principle of comparative advantage was developed by a. Adam Smith. b. 2arry !ruman. c. &avid Ricardo. d. +ohn $aynard %eynes. ANSWER c. &avid Ricardo. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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Economists generally support a. government management of trade. b. free international trade. c. trade restrictions. d. e.port subsidies. ANSWER b. free international trade. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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%arl $alone C1@@> N*A $,#D is a better bas3etball player and truc3 driver than <regory $an3iw Cthe author of your economics te.tD. Which of the following is trueE a. %arl $alone and <regory $an3iw may benefit from trade. b. %arl $alone would be better off playing bas3etball and driving his own truc3. c. %arl $alone will probably have a comparative advantage in both goods. d. %arl $alone will have a lower opportunity cost of playing bas3etball and truc3 driving than will <regory $an3iw. ANSWER a. %arl $alone and <regory $an3iw may benefit from trade. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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E.ports are a. a limit placed on the Fuantity of goods brought into a country. b. goods produced domestically and sold abroad. c. usually a countrys least desirable product. d. goods produced abroad and sold domestically. ANSWER b. goods produced domestically and sold abroad. !"#E $ %E"1 ! SE'!()N 8 )*+E'!(,E 7RAN&)$ "
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!he /nited States could benefit by a. promoting imports and restricting e.ports. b. restricting imports and promoting e.ports. c. restricting both imports and e.ports. d. not restricting trade. ANSWER d. not restricting trade. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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!he gains from trade are a. higher from trade between a rich nation and a poor nation. b. a result of more efficient resource allocation. c. based on different wage rates between nations. d. based on the principle of absolute advantage. ANSWER b. a result of more efficient resource allocation. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "

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ANSWER a. with trade. !"#E $ %E"1 & SE'!()N 1 )*+E'!(,E 1 RAN&)$ "
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ANSWER c. both nations can benefit from trade. !"#E $ %E"1 & SE'!()N - )*+E'!(,E 1 RAN&)$ "
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ANSWER b. - pounds of potatoes. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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ANSWER c. 7 pounds of potatoes. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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ANSWER a. 19- pound of meat. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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ANSWER d. 197 pound of meat. !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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ANSWER d. neither good0 both goods !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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ANSWER c. potatoes0 meat !"#E $ %E"1 ! SE'!()N - )*+E'!(,E - (NS!R/'!()N 1 RAN&)$ "
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ANSWER b. meat0 potatoes !"#E $ %E"1 ! SE'!()N - )*+E'!(,E 8 (NS!R/'!()N 1 RAN&)$ "
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ANSWER a. 19- boo3. !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER c. : boo3s. !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER b. 19: video. !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER c. - videos !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER c. both goods0 neither good !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER a.

boo3s0 videos

!"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER b. boo3s0 videos !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER b. 740 7 !"#E $ %E"1 < SE'!()N - )*+E'!(,E 8 <RA#2 5)R$A! $ B/ES!()N (NS!R/'!()N 7 RAN&)$ N
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ANSWER d. opportunity costs. !"#E $ %E"1 & SE'!()N - )*+E'!(,E 8 RAN&)$ "
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ANSWER d. comparing the productivity of one nation to that of another. !"#E $%E"1 & SE'!()N - )*+E'!(,E 8 RAN&)$ "
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ANSWER c. &avid Ricardo. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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ANSWER b. free international trade. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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ANSWER a. %arl $alone and <regory $an3iw may benefit from trade. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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ANSWER b. goods produced domestically and sold abroad. !"#E $ %E"1 ! SE'!()N 8 )*+E'!(,E 7RAN&)$ "
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ANSWER d. not restricting trade. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "
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ANSWER b. a result of more efficient resource allocation. !"#E $ %E"1 & SE'!()N 8 )*+E'!(,E 7 RAN&)$ "