Assume that the United States uses 20 worker-hours to produce 1 computer and 5 worker-hours to produce 1 unit of food; assume also that Japan uses 10 worker-hours to produce 1 computer and 30 worker-hours to produce 1 unit of food. Which of the following statements is true?
a. Japan has the comparative advantage in food production.
b. The United States has the comparative advantage in food production.
c. The United States has the absolute advantage in food production.
d. The United States has a lower opportunity cost for making computers.
e. Japan has a lower opportunity cost for making food.
QUESTION 2Why do market failures arise in case of public goods?
a. The quantity produced is much more than is actually required by the people.
b. The quality of these goods is not good enough.
c. The quantity produced is too less from the society's point of view.
d. The government wastes a lot of resources for producing a public good.
e. The users of such goods are required to pay a high price for these goods.
QUESTION 3The concept of comparative advantage applies:
a. only to people with at least a high school diploma.
b. only to people who are currently employed.
c. to situations in which you have information about the salary levels of those with whom you are competing for a job.
d. to every case of trade or exchange.
e. only to goods that are sold in the domestic market.
QUESTION 4In the case of public goods, _____.
a. the free rider problem does not arise
b. one person's consumption of the good reduces the consumption of the good by others
c. individuals can be easily excluded from consuming the good once it is provided
d. the quantity produced by a private market would be too large from society's viewpoint
e. the principle of mutual excludability and principle of rivalry do not apply
QUESTION 5Which of the following statements is true about comparative advantage?
a. Comparative advantage exists whenever one person, firm, or nation can do something at higher opportunity costs than some other individual, firm, or nation.
b. Comparative advantage is interesting theoretically, but it is not relevant when evaluating real-world economic conditions.
c. Low income countries cannot possibly have a comparative advantage in the production of any good or service because of the relatively low literacy rate.
d. Comparative advantage exists whenever one person, firm, or nation can do something at lower opportunity costs than some other individual, firm, or nation.
e. Only technologically advanced economies can have a comparative advantage in the production of a good or service.
QUESTION 6For which of the following goods will the free rider problem arise?
a. Private golf course
b. Cable television
c. Privately owned apartment
d. National defense
e. Movie theatres
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