Week 2 Quiz

In this course, what does it mean for a producer to have a comparative advantage in a good?

Select one.

• It makes more of that good than another producer from the same resources
• It can make that good at a lower opportunity cost than another producer
• It can make more of every good than another producer
• It can sell that good for more money than another producer

At the campus food stand (Dataset D, illustrative), in one hour Amara can make 8 smoothies or 4 sandwiches, and Diego can make 3 smoothies or 3 sandwiches. Which statement about absolute advantage is accurate?

Select one.

• Amara has the absolute advantage in both goods
• Diego has the absolute advantage in sandwiches
• Each partner has the absolute advantage in one good
• Neither partner has an absolute advantage

At the campus food stand (Dataset D, illustrative), in one hour Amara can make 8 smoothies or 4 sandwiches, and Diego can make 3 smoothies or 3 sandwiches. What is Amara's opportunity cost of making one sandwich?

Select one.

• 1⁄2 smoothie per sandwich
• 1 smoothie per sandwich
• 2 smoothies per sandwich
• 4 sandwiches per hour

At the campus food stand (Dataset D, illustrative), in one hour Amara can make 8 smoothies or 4 sandwiches, and Diego can make 3 smoothies or 3 sandwiches. Who has the comparative advantage in making sandwiches, and why?

Select one.

• Amara, because she makes 4 sandwiches an hour and Diego makes only 3
• Amara, because she has the absolute advantage in both goods
• Neither, because Amara is better at making everything
• Diego, because his opportunity cost of a sandwich is lower than Amara's

At the campus food stand (Dataset D, illustrative), in one hour Amara can make 8 smoothies or 4 sandwiches, and Diego can make 3 smoothies or 3 sandwiches. Each partner's opportunity cost of a sandwich is that partner's smoothies per hour divided by sandwiches per hour. Which rate of trade, in smoothies per sandwich, would leave both partners better off?

Select one.

• 0.5 smoothie per sandwich
• 1.5 smoothies per sandwich
• 2.5 smoothies per sandwich
• 3 smoothies per sandwich

At the campus food stand (Dataset D, illustrative), in one hour Amara can make 8 smoothies or 4 sandwiches, and Diego can make 3 smoothies or 3 sandwiches. Suppose the partners are offered a rate of 2.5 smoothies for each sandwich Diego hands to Amara. What does the model predict?

Select one.

• Amara refuses, because she would pay more than a sandwich costs her to make
• Diego refuses, because he would receive less than a sandwich costs him to make
• Both partners gain, because any rate they agree on helps both
• Both partners refuse, because 2.5 is below both opportunity costs

At the campus food stand (Dataset D, illustrative), in one hour Amara can make 8 smoothies or 4 sandwiches, and Diego can make 3 smoothies or 3 sandwiches. Each partner works 8 hours. Before trade each splits the hours evenly, so Amara makes (32, 16) and Diego makes (12, 12), written (smoothies, sandwiches). Then Diego makes only sandwiches, Amara spends 6 hours on smoothies and 2 on sandwiches, and Diego trades 10 sandwiches for 15 smoothies. Select every accurate statement.

Select every option that applies.

• Amara ends with 33 smoothies and 18 sandwiches
• Diego ends with 15 smoothies and 14 sandwiches
• The stand's total smoothies rise from 44 to 48
• Diego is worse off, because he gives away 10 sandwiches
• The stand makes fewer sandwiches in total than before trade

True or false: a producer that has the absolute advantage in both goods can still gain by specializing in the good with its lower opportunity cost and trading for the other.

True or false.

• True
• False

True or false: if two producers have different opportunity costs, one of them can hold the comparative advantage in both goods.

True or false.

• True
• False

Which of these statements about trade is normative rather than positive?

Select one.

• Specialization by comparative advantage can raise total output
• Trade can shift production, and jobs, away from some towns
• A country should limit imports to protect its furniture makers
• A rate between two producers' opportunity costs leaves both better off