Study Game - Topic 1.3Versión en línea Comparative Advantage and Gains from Trade por Zachary Foust 1 The table shows that Foustland can produce 10 widgets or 100 gadgets using all its available resources in a year. Mooreland can produce 10 widgets or 50 gadgets using all its available resources in a year. Based on the information provided above, which of the following must be true? a Foustland has the comparative advantage in the production of widgets. b Foustland has the absolute advantage in the production of gadgets. c Mooreland has the comparative advantage in the production of gadgets. d Mooreland has the absolute advantage in the production of widgets. 2 If two nations specialize according to their individual comparative advantages and engage in trade, then which of the following must be true? a Both nations can consume only what they produce. b Nations would be better off if they were self-sufficient. c If one nation gains from trade with the other nation, then the other nation will lose. d Both nations can consume beyond their individual production possibilities. 3 The table shows that Foustland can produce 10 widgets or 100 gadgets using all its available resources in a year. Mooreland can produce 10 widgets or 50 gadgets using all its available resources in a year. Based on the information provided above, which of the following are mutually beneficial terms of trade at which both Foustland and Mooreland will be willing to specialize and exchange? a 1 widget for 1 gadget b 1 widget for 6 gadgets c 1 widget for 17 gadgets d 1 widget for 20 gadgets 4 A country has the absolute advantage in the production of a good if a it can produce more of a good than another country. b it can produce a good for a lower opportunity cost than another country. c it can produce a good for a higher opportunity cost than another country. d it specializes and trades with another country. 5 A country has the comparative advantage in the production of a good if a it can produce more of a good than another country. b it can produce a good for a lower opportunity cost than another country. c it can produce a good for a higher opportunity cost than another country. d it remains self-sufficient. 6 Analyze the graph. Which of the following statements is true? a Foust has the absolute advantage in the production of corn. b Foust has the comparative advantage in the production of corn. c Neither Foust nor Ricardo have the comparative advantage in the production of wool. d Neither Foust nor Ricardo have the absolute advantage in the production of wool. 7 Analyze the graph. Which of the following statements is true? a Foust has the comparative advantage in the production of corn. b Foust has the comparative advantage in the production of wool. c Neither Foust nor Ricardo have the comparative advantage in the production of wool. d Both Foust and Ricardo have the absolute advantage in the production of wool. 8 The terms of trade definitely benefit one party but not the other if a one party specializes in the production of a good. b the producer receives more than the opportunity cost of production. c the producer receives less than the opportunity cost of production. d it is cheaper for the consumer to buy a good than to produce it. 9 Consumption outside of the production possibilities curve is a not feasible under any circumstances. b inefficient. c possible if a country is self-sufficient. d possible with specialization and trade. 10 Which of the following best illustrates the concept of specialization? a A point inside the production possiblities curve b A point outside the production possibilities curve c A point on the Y-intercept of the production possibilities curve d An outward shift of the production possibilities curve
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