Biology Forums - Study Force

If there are important spillover benefits from consumption of a good,
 a. government should prohibit its production.
 b. taxes should be imposed on producers of the product.
 c. the market demand curve for the good understates the value of the product to society and resources are therefore underallocated to its production.
  d. the market demand curve for the good overstates the value of the product to society and resources are therefore overallocated to its production.

Question 2

Comparative advantage occurs when a person or a country can produce a good or service at a lower ____ than others.
 a. fixed cost
 b. variable cost
 c. opportunity cost
  d. total cost

Question 3

Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. Calculate the opportunity cost of producing sugar in Brazil.
 a. Half a pound of coffee
  b. 4 pounds of coffee
  c. 1 pound of coffee
  d. 2 pounds of coffee
  e. One and a half pounds of coffee

Question 4

If the production of a good creates large spillover benefits on others, the government might correct for the:
 a. overallocation of resources to its production by subsidizing it.
 b. overallocation of resources to its production by imposing a tax on it.
  c. underallocation of resources to its production by subsidizing it.
 d. underallocation of resources to its production by imposing a tax on it.

Question 5

In Samoa the opportunity cost of producing 1 coconut is 4 pineapples, while in Guam the opportunity cost of producing 1 coconut is 5 pineapples. In this situation:
 a. if trade occurs, both countries will be able to consume beyond their original production possibilities frontiers.
  b. Guam will be better off if it exports coconuts and imports pineapples.
 c. both Samoa and Guam will be better off if Samoa produces both coconuts and pineapples.
 d. mutually beneficial trade cannot occur.

Question 6

Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. Which of the following statements is true?
 a. Brazil has a comparative advantage in producing coffee.
  b. Brazil has a comparative advantage in producing both coffee and sugar.
  c. Chile has a comparative advantage in producing both coffee and sugar.
  d. Neither Chile nor Brazil has a comparative advantage in producing coffee.
  e. Brazil has a comparative advantage in producing sugar.

Question 7

Assume that production of a good generates external benefits for others. The equilibrium price of the good will be ____ and the equilibrium quantity ____ for efficient resource allocation.
 a. too high; too high.
  b. too high; too low.
  c. too low; too high.
  d. too low, too low.

Question 8

Which of the following is not a major trading partner of the U.S.?
 a. Canada
  b. Mexico
  c. Russia
 d. China

Question 9

Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar. Which of the following statements is true?
 a. Brazil has an absolute advantage in producing only coffee.
  b. Brazil has an absolute advantage in producing only sugar.
  c. Chile has an absolute advantage in the production of both coffee and sugar.
  d. Chile has an absolute advantage in producing only coffee.
  e. Brazil has an absolute advantage in the production of both coffee and sugar.

Question 10

Assume that production of a good imposes external costs on others. The equilibrium price will be ____ and the equilibrium quantity ____ for efficient resource allocation.
 a. too high; too high.
  b. too high; too low.
  c. too low; too high.
  d. too low, too low.

Question 11

If two countries produce both wheat and sugar and one country has the comparative advantage in producing wheat than the other country must have the absolute advantage producing sugar.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 12

If Japan has a comparative advantage over Canada in the production of computers, which of the following must be true?
 a. Supply of unskilled labor in Japan is higher than that in Canada.
  b. Japan incurs a lower input cost in the production of computers.
  c. Japan incurs a higher input cost in the production of computers.
  d. Japan has a lower opportunity cost in the production of computers.
  e. Japan has a higher opportunity cost in the production of computers.

Question 13

If Don paints the outside of his house a horrendous color:
 a. he probably has lowered the value of his home, but not that of his neighbors' homes.
 b. he probably has lowered the value of his home and the value of his neighbors' homes.
 c. he probably has lowered the value of his neighbors' homes but not the value of his own home.
  d. none of the above

Question 14

When a country allows trade and becomes an importer of goods, producers gain more than consumers lose.
 a. True
  b. False
  Indicate whether the statement is true or false

Question 15

We benefit from trade if we are able to obtain a good from a foreign country:
 a. that has a very low domestic demand.
  b. the production of which requires a steady supply of unskilled labor.
  c. by giving up less of other goods than we would have to give up to obtain the good at home.
  d. by giving up more of other goods than we would have to give up to obtain the good at home.
  e. that has a substantial number of substitutes in the domestic market.

Content hidden

Amazing, correctly answered