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Exam 2: Comparative Advantage

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Question 1

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The main reason that firms outsource is that:

A) low-wage workers in other countries are more productive than are U.S.workers.
B) hiring low-wage workers reduces firms' costs.
C) hiring low-wage workers provides a tax deduction to firms.
D) U.S.workers cannot perform the tasks performed by workers in other countries.

E) B) and C)
F) B) and D)

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Question 2

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Smith and Jones comprise a two-person economy.Their hourly rates of production are shown below. $\begin{array}{ccc}\underline{\text { Good }} & \underline{\text { Smith }} & \underline{\text { Jones } }\\\text { Computers } & 10 & 6 \\\text { Calculators } & 100 & 120\end{array}$ Refer to the table above.If Smith and Jones are dividing their time efficiently and producing more than 10 computers and fewer than 120 calculators per hour,Smith will __________ and Jones will __________.

A) produce only computers;produce only calculators
B) produce only computers;split his time between computers and calculators
C) split his time between computers and calculators;produce only computers
D) produce only calculators;produce only computers

E) A) and B)
F) None of the above

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Question 3

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Lou and Alex live together and share household chores.They like to cook some meals ahead of time and eat leftovers.Suppose that in one hour Lou and Alex can do the following: $\begin{array} { | l | l | l | } \hline & \text { Alex } & \text { Lou } \\\hline \text { Whole Hour Cleaning } & 3 \text { rooms } & 5 \text { rooms } \\\hline \text { Whole Hour Cooking } & 3 \text { meals } & 4 \text { meals } \\\hline 1 / 2 \text { hour, Each Activity } & 1.5 \text { rooms; } 1.5 \text { meals } & 2.5 \text { rooms; } 2 \text { meals } \\\hline\end{array}$ For Alex,the opportunity cost of cleaning one room is ____ meal(s) ;for Lou the opportunity cost of cleaning one room is _____ meal(s) .

This graph describes the production possibilities on the island of Genovia: The opportunity cost of producing one ton of agricultural products in Genovia is:

Application of the Principle of Comparative Advantage leads to:

When firms engage in outsourcing,________ benefit and ______ are harmed.

Large developed countries can produce more of practically everything than can small,less developed countries.Which of the following statements is true?

A country may have a comparative advantage in the production of cars if:

Suppose that a further increase in specialization allows a country to increase total output by 10%,but afterward it was discovered that work absenteeism increased by 30%.This is likely an example of:

Which of the following is true?

You are the Minister of Trade for a small island country in the South Pacific with the following annual production possibilities curve: You are negotiating a deal with a neighboring island that has the following annual PPC: Refer to the figure above.If you offer to give the other island 400 coconuts in exchange for 1,500 fish:

This graph describes the production possibilities on the island of Genovia: Assuming efficient production,If 500 cars are produced in Genovia:

When journalists write about outsourcing,they are referring to:

Dent 'n' Scratch Used Cars and Trucks employs 3 salesmen.Data for their sales last month are shown in this table: $\begin{array} { | l | l | l | } \hline & \text { Cars Sold } & \text { Trucks Sold } \\\hline \text { Larry } & 10 & 5 \\\hline \text { Joe } & 9 & 9 \\\hline \text { Ralph } & 3 & 12 \\\hline\end{array}$ For Ralph,the opportunity cost of selling a truck is:

Smith and Jones comprise a two-person economy.Their hourly rates of production are shown below. $\begin{array}{ccc}\underline{\text { Good }} & \underline{\text { Smith }} & \underline{\text { Jones } }\\\text { Computers } & 10 & 6 \\\text { Calculators } & 100 & 120\end{array}$ Refer to the table above.If Smith and Jones are dividing their time efficiently and producing fewer than 10 computers and more than 120 calculators per hour,Smith will __________ and Jones will __________.

A graph that illustrates the maximum amount of one good that can be produced for every possible level of production of the other good is called a(n) :

Between the U.S.and Nepal,Nepal invests less in new factories and equipment.This will likely cause:

Which of the following factors would not contribute to increasing an existing comparative advantage?

If Leslie can produce two pairs of pants in an hour while Eva can make one pair an hour,then it must be the case that:

Moe divides his time between studying Physics and studying Economics.He has discovered that he can earn grades as shown on this production possibilities curve. Moe needs to earn at least an 80 in both economics and physics to keep his scholarship.Given his current PPC,an 80 in both classes is ______.