Question

QUESTION 1

For a nation to have ________ in producing a good it must have a lower opportunity cost of producing that good than the other country.

	A.	an absolute advantage
	B.	an autarky advantage
	C.	a comparative advantage
	D.	both a comparative advantage and an absolute advantage

4 points   

QUESTION 2

The relative amounts of the goods that will be exchanged for each other in trade refers to the nations'

	A.	autarky status.
	B.	terms of trade.
	C.	absolute advantages.
	D.	production possibilities.

4 points   

QUESTION 3

As a whole, nations are better off after trade and specialization because

	A.	nations experience an inward shift of their production possibilities curve.
	B.	nations can consume along their consumption possibilities curve, which is outside of their production possibilities curve.
	C.	nations can consume along their production possibilities curve, which is outside of their consumption possibilities curve.
	D.	nations can consume along their consumption possibilities curve, which is inside of their production possibilities curve.

4 points   

QUESTION 4

Which of the following statements is true?

	A.	Free trade leads to lower wages for all workers in both nations.
	B.	Free trade will benefit all workers in a nation equally.
	C.	Specialization will result in a decline in an industry and none of those workers will be able to find other jobs.
	D.	As a result of specialization some workers will be displaced and harmed in the short run by free trade.

Answer 1

QUESTION 1

For a nation to have ________ in producing a good it must have a lower opportunity cost of producing that good than the other country.

ANS: (C). A comparative advantage.

The ability of a nation's residents to produce a unit of a good or service at a lower opportunity cost than residents of another country is known as comparative advantage.

Comparative advantage exists when residents of one country can produce a good or service at lower opportunity cost than residents of another country.

QUESTION 2

The relative amounts of the goods that will be exchanged for each other in trade refers to the nations

ANS: (C). Terms of trade.

QUESTION 3

As a whole, nations are better off after trade and specialization because

ANS: (B). Nations can consume along their consumption possibilities curve, which is above / outside of their production possibilities curve.