True/False Questions Flashcards
#CHT3 1. If Japan has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item.
F
absolute advantage compares the quantities of inputs used in production while comparative advantage compares the opportunity costs
#CHT3 2. Comparative advantage, not absolute advantage, determines the decision to specialize in production.
T
#CHT3 3. Absolute advantage is a comparison among producers based on productivity.
T
#CHT3 4. Self-sufficiency is the best way to increase one's material welfare.
F
Restricting trade eliminates gains from trade.
#CHT3 5. Comparative advantage is a comparison among producers based on opportunity cost.
T
#CHT3 6. If a producer is self-sufficient, the production possibilities frontier is also the consumption possibilities frontier.
T
#CHT3 7. If a country's workers can produce 5 hamburgers per hour or 10 bags of French fries per hour, absent trade, the price of 1 bag of fries is 2 hamburgers.
F
The price of 1 bag of fries is 1/2 of a hamburger.
#CHT3 8. If producers have different opportunity costs of production, trade will allow them to consume outside their production possibilities frontiers.
T
#CHT3 9. If trade benefits one country, its trading partner must be worse off due to trade.
F
Voluntary trade benefits both traders.
#CHT3 10. Talented people that are the best at everything have a comparative advantage in the production of everything.
F
A low opportunity cost of producing one good implies a high opportunity cost of producing the other good.
#CHT3 11. The gains from trade can be measured by the increase in total production that comes from specialization.
T
#CHT3 12. When a country removes a specific import restriction, it always benefits every worker in that country
F
It may harm those involved in that industry.
#CHT3 13. If Germany's productivity doubles for everything it produces, this will not alter its prior pattern of specialization because it has not altered its comparative advantage.
T
#CHT3 14. If an advanced country has an absolute advantage in the production of everything, it will benefit if it eliminates trade with less developed countries and becomes completely self-sufficient.
F
Voluntary trade benefits all traders.
#CHT3 15. If gains from trade are based solely on comparative advantage, and ifall countries have the same opportunity costs of production, then there are no gains from trade.
T
#CHT4 1. A perfectly competitive market consists of products that are all slightly different from one another.
F
A perfectly competitive market consists of goods
offered for sale that are all exactly the same.
#CHT4 2. A monopolistic market has only one seller.
T
#CHT4 3. The law of demand states that an increase in the price of a good decreases the demand for that good.
F
The law of demand states that an increase in the price of a good decreases the quantity demanded of that good (a movement along the demand curve).
#CHT4 4. If apples and oranges are substittutes, an increase in the price of apples will decrease the demand for oranges.
F
It will increase the demand for oranges.
#CHT4 5. If golf clubs and golf balls are complements, an increase in the price of golf clubs will decrease the demand for golf balls.
T
#CHT4 6. If consumers expect the price of shoes to rise, there will be an increase in the demand for shoes today.
T
#CHT4 7. The law of supply states that an increase in the price of a good increases the quantity supplied of that good.
T
#CHT4 8. An increase in the price of steel will shift the supply of automobiles to the right.
F
An increase in the price of an input shifts the supply curve for the output to the left.
#CHT4 9. When the price of a good is below the equilibrium price, it causes a surplus.
F
It causes an excess demand.