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Principles of Microeconomics, 1st Canadian Edition

Robert H. Frank, Cornell University
Ben S. Bernanke, Princeton University
Lars Osberg, Dalhousie University
Melvin Cross, Dalhousie University
Brian MacLean, Laurentian University

Comparative Advantage: The Basis for Exchange

Pre-Test


1	Jane can produce 50 pizzas or 100 hamburgers per day, while Sam can produce 30 pizzas or 90 hamburgers per day. Jane has an
		A)	absolute advantage in the production of pizzas, but not hamburgers, and has a comparative advantage in the production of pizzas.
		B)	absolute advantage in the production of hamburgers, but not pizzas, and has a comparative advantage in the production of hamburgers.
		C)	absolute advantage in the production of hamburgers, and pizzas, as well as a comparative advantage in the production of hamburgers.
		D)	absolute advantage in the production of hamburgers, and pizzas, as well as a comparative advantage in the production of pizzas.
		E)	absolute advantage in the production of hamburgers, and pizzas, as well as a comparative advantage in the production of hamburgers and pizzas.


2	When each individual concentrates on performing the tasks and producing the goods for which he or she has the lowest opportunity cost, they are producing in accordance with the principle of
		A)	increasing opportunity cost.
		B)	decreasing opportunity cost.
		C)	comparative advantage.
		D)	scarcity
		E)	absolute advantage.


3	At the individual level, comparative advantage results from
		A)	differences in natural resources.
		B)	cultural differences.
		C)	language differences.
		D)	the amount of resources available.
		E)	differences in education or training.


4	Production possibilities curves are downward sloping, reflecting the principle of
		A)	scarcity.
		B)	comparative advantage.
		C)	increasing opportunity cost.
		D)	absolute advantage.
		E)	decreasing opportunity cost.


5	Maria can produce 100 pounds of tomatoes or 25 pounds of squash in her garden each summer, while Tonya can produce 50 pounds of tomatoes or 25 pounds of squash. The absolute values of the slope of Maria and Tonya's production possibility curves, respectively, are
		A)	25 and 25.
		B)	1/2 and 1/4.
		C)	4 and 2.
		D)	2 and 4.
		E)	100 and 50.


6	Which of the following can be a source of comparative advantage for an individual?
		A)	inborn talent
		B)	education
		C)	training
		D)	experience
		E)	all of the above


7	Which of the following can be a source of comparative advantage for a country?
		A)	natural resources
		B)	entrepreneurship
		C)	speaking the English language
		D)	standards of production quality
		E)	all of the above


8	If a country experiences increasing opportunity costs, its production possibilities curve will
		A)	be a straight line.
		B)	bow outward.
		C)	bow inward.
		D)	shift out from the origin.
		E)	shift in toward the origin.


9	According to the Circular Flow of Income and Expenditure Model, workers use their wages to
		A)	sell labour.
		B)	produce goods and services.
		C)	purchase the goods and services they make.
		D)	buy labour.
		E)	sell the goods and services they make.


10	Which of the following is the basis for an argument against free trade?
		A)	the Principle of Comparative Advantage
		B)	the change in the total value of goods and services resulting from trade
		C)	the distribution of the benefits from trade
		D)	the Principle of Increasing Opportunity Costs
		E)	all of the above

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