Question 1

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Accepted Answer

Absolute advantage refers to productivit...

Question 2

Busisani is a tax accountant. He receives R100 per hour doing tax returns. He can type 10 000 characters per hour into spreadsheets. He can hire an assistant who types 2 500 characters per hour into spreadsheets. Which of the following statements is true?

Accepted Answer

A)   None of these answers.
B)   Busisani should hire the assistant as long as he pays the assistant less than R25 per hour.
C)   Busisani should not hire an assistant because the assistant cannot type as fast as he.
D)   Busisani should hire the assistant as long as he pays the assistant less than R100 per hour.E) All of the above
F) A) and D)

Question 3

When a country allows trade and exports a good,

Accepted Answer

A)   domestic consumers are better off, domestic producers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners.
B)   domestic consumers are better off, domestic producers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers.
C)   domestic producers are better off, domestic consumers are worse off, and the nation is worse off because the losses of the losers exceed the gains of the winners.
D)   domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers.E) B) and C)
F) A) and B)

Question 4

Which of the following statements is true?

Accepted Answer

A)   A self-sufficient country can, at best, consume on its production possibilities frontier.
B)   Only countries with an absolute advantage in the production of every good should strive to be self-sufficient.
C)   A self-sufficient country consumes outside its production possibilities frontier.
D)   Self-sufficiency is the road to prosperity for most countries.E) A) and C)
F) A) and D)

Question 5

Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes.
a. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes.
b. On the graph, label a point that is efficient and a point that is inefficient.
c. On the graph, illustrate the effect of the discovery of a new vein of iron ore, a resource needed to make both horseshoes and hammers, on this economy.
d. On a second graph, illustrate the effect of a new computerised assembly line in the production of hammers on this economy.

Accepted Answer

The answer of Draw a production possibilities frontier showing increasing...

Question 6

Economic growth is depicted by a

Accepted Answer

A)   shift in the production possibilities frontier outward.
B)   movement from inside the curve toward the curve.
C)   shift in the production possibilities frontier inward.
D)   movement along a production possibilities frontier toward capital goods.E) A) and B)
F) None of the above

Question 7

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia.
   Fond  Electranics  South Africa 205 Narmibia 82\begin{array} { | l | c | c | } \hline & 	ext { Fond } & 	ext { Electranics } \\hline 	ext { South Africa } & 20 & 5 \\hline 	ext { Narmibia } & 8 & 2 \\hline\end{array} South Africa  Narmibia ​ Fond 208​ Electranics 52​​ 
-Refer to Table 1. Which of the following statements about comparative advantage is true?

Accepted Answer

A)   South Africa has a comparative advantage in the production of both food and electronics.
B)   Namibia has a comparative advantage in the production of both food and electronics.
C)   South Africa has a comparative advantage in the production of food while Namibia has a comparative advantage in the production of electronics.
D)   Namibia has a comparative advantage in the production of food while South Africa has a comparative advantage in the production of electronics.
E)   Neither country has a comparative advantage. F) A) and B)
G) A) and C)

Question 8

Opportunity costs change as an economy moves along its production possibilities frontier because

Accepted Answer

A)   resources are not completely adaptable to alternative uses.
B)   factors of production are limited and human wants are unlimited.
C)   efficiencies are generated by large-scale production.
D)   economic efficiency is only possible in the short run.E) None of the above
F) A) and B)

Question 9

If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

Accepted Answer

A) True 
 B)False

Question 10

Comparative advantage, not absolute advantage, determines the decision to specialise in production.

Accepted Answer

A) True 
 B)False

Question 11

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia.
   Fond  Electranics  South Africa 205 Narmibia 82\begin{array} { | l | c | c | } \hline & 	ext { Fond } & 	ext { Electranics } \\hline 	ext { South Africa } & 20 & 5 \\hline 	ext { Narmibia } & 8 & 2 \\hline\end{array} South Africa  Narmibia ​ Fond 208​ Electranics 52​​ 
-Refer to Table 1. The opportunity cost of 1 unit of food in South Africa is

Accepted Answer

A)   1/5 of a unit of electronics.
B)   5 units of electronics.
C)   4 units of electronics.
D)   1/4 of a unit of electronics. E) B) and D)
F) B) and C)

Question 12

Opponents of free trade often argue that free trade destroys domestic jobs.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 3
 
-Refer to Exhibit 3. If free trade is allowed, consumer surplus is the

Accepted Answer

A)   Area A + B + C + D + E + F + G.
B)   Area A + B.
C)   Area A + B + C + D + E + F.
D)   Area A.
E)   Area A + B + C.F) B) and E)
G) D) and E)

Question 14

Exhibit 2
 
-Refer to Exhibit 2. If free trade is allowed, consumer surplus is the

Accepted Answer

A)   Area A + B + C + D.
B)   Area A.
C)   Area A + B + D.
D)   Area A + B + C.
E)   Area A + B.F) A) and E)
G) D) and E)

Question 15

Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

Accepted Answer

A) True 
 B)False

Question 16

All points on a production possibilities frontier show the

Accepted Answer

A)   maximum satisfaction that households receive from their purchases of goods.
B)   minimum quantities of resources that must be used to produce a given quantity of output.
C)   maximum output that society can produce with given resources and technology.
D)   minimum output that society can produce with given resources and technology.E) C) and D)
F) All of the above

Question 17

Use the graph to answer the following questions about music album downloads.
 $$\text { R22 }$$  
a. What is the equilibrium price of music album downloads before trade?
b. What is the equilibrium quantity of music album downloads before trade?
c. What is the price of music album downloads after trade is allowed?
d. What is the quantity of music album downloads exported after trade is allowed?
e. What is the amount of consumer surplus before trade?
f. What is the amount of consumer surplus after trade?
g. What is the amount of producer surplus before trade?
h. What is the amount of producer surplus after trade?
i. What is the amount of total surplus before trade?
j. What is the amount of total surplus after trade?
k. What is the change in total surplus because of trade?

Accepted Answer

a. R12
b. 50
c. R15
...

Question 18

Table 1 shows the units of output a worker can produce per month in South Africa and Namibia.
   Fond  Electranics  South Africa 205 Narmibia 82\begin{array} { | l | c | c | } \hline & 	ext { Fond } & 	ext { Electranics } \\hline 	ext { South Africa } & 20 & 5 \\hline 	ext { Narmibia } & 8 & 2 \\hline\end{array} South Africa  Narmibia ​ Fond 208​ Electranics 52​​ 
-Refer to Table 1. The opportunity cost of 1 unit of electronics in Namibia is

Accepted Answer

A)   4 units of food.
B)   1/4 units of food.
C)   2 units of food.
D)   1/2 of a unit of food. E) A) and D)
F) B) and C)

Exam 19: Interdependence and the Gains From Trade

Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

Correct Answer
verified

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Correct Answer
verified
Absolute advantage refers to productivit...
View Answer

Which of the following statements is true?

Correct Answer
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Correct Answer
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Correct Answer
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Economic growth is depicted by a

Correct Answer
verified

Correct Answer
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a. R12
b. 50
c. R15
...
View Answer

Correct Answer
verified

Opponents of free trade often argue that free trade destroys domestic jobs.

Correct Answer
verified

When a country allows trade and exports a good,

Correct Answer
verified

Busisani is a tax accountant. He receives R100 per hour doing tax returns. He can type 10 000 characters per hour into spreadsheets. He can hire an assistant who types 2 500 characters per hour into spreadsheets. Which of the following statements is true?

Correct Answer
verified

If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

Correct Answer
verified

Correct Answer
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Exhibit 3 -Refer to Exhibit 3. If free trade is allowed, consumer surplus is the

Correct Answer
verified

Exhibit 2 -Refer to Exhibit 2. If free trade is allowed, consumer surplus is the

Correct Answer
verified

All points on a production possibilities frontier show the

Correct Answer
verified

Opportunity costs change as an economy moves along its production possibilities frontier because

Correct Answer
verified

Comparative advantage, not absolute advantage, determines the decision to specialise in production.

Correct Answer
verified

Exam 19: Interdependence and the Gains From Trade

Tariffs and quotas cause deadweight losses because they raise the price of the imported good and cause over-production and under-consumption of the good in the importing country.

Correct AnswerverifiedShow Answer

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?

Correct AnswerverifiedAbsolute advantage refers to productivit...View AnswerShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Economic growth is depicted by a

Correct AnswerverifiedShow Answer

Correct Answerverifieda. R12b. 50c. R15...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Opponents of free trade often argue that free trade destroys domestic jobs.

Correct AnswerverifiedShow Answer

When a country allows trade and exports a good,

Correct AnswerverifiedShow Answer

Busisani is a tax accountant. He receives R100 per hour doing tax returns. He can type 10 000 characters per hour into spreadsheets. He can hire an assistant who types 2 500 characters per hour into spreadsheets. Which of the following statements is true?

Correct AnswerverifiedShow Answer

If an economy is operating on its production possibilities frontier, it must be using its resources efficiently.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Exhibit 3 -Refer to Exhibit 3. If free trade is allowed, consumer surplus is the

Correct AnswerverifiedShow Answer

Exhibit 2 -Refer to Exhibit 2. If free trade is allowed, consumer surplus is the

Correct AnswerverifiedShow Answer

All points on a production possibilities frontier show the

Correct AnswerverifiedShow Answer

Opportunity costs change as an economy moves along its production possibilities frontier because

Correct AnswerverifiedShow Answer

Comparative advantage, not absolute advantage, determines the decision to specialise in production.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Absolute advantage refers to productivit...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a. R12
b. 50
c. R15
...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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