2.5 Specialization, Comparative Advantage, and Trade
1) Comparative advantage is
A) when a country can produce a good at a lower opportunity cost compared to other countries.
B) when a country can produce all goods more quickly than any other country.
C) when the production possibilities curve shifts outward to the right.
D) only for individuals and not countries.
2) If a person can make $70,000 as an accountant, $60,000 as a chef, $20,000 as a mechanic, and nothing as an opera singer, he or she has a comparative advantage in
B) being a chef.
C) being a mechanic.
D) opera singing.
3) Carlos is an executive of a major corporation. Boris is a baker. Carlos earns a salary ten times as large as the salary Boris earns, and Carlos has a much larger oven for baking break. Carlos can make a loaf of bread that tastes better than Boris's bread but Boris can bake faster.
A) Carlos has an absolute and comparative advantage over Boris in making bread.
B) Carlos has an absolute but not comparative advantage over Boris in making bread.
C) Carlos had a comparative but not absolute advantage over Boris in making bread.
D) Carlos does not have an absolute or comparative advantage over Boris in making bread.
4) Which is the best example of specialization?
A) a high school math teacher who teaches only calculus
B) a firm that produces both luggage and cooking oil
C) a person whose job includes accounting, personnel, and maintenance tasks
D) a high school math teacher who teaches algebra and calculus
5) Why specialize?
A) because assigning each worker a variety of tasks makes her more productive
B) It usually increases productivity.
C) to decrease our dependence on each other
D) There is no economic rationale for specialization.
6) Specialization can occur because
A) governments pass laws that require it.
B) varying skills differentiate workers.
C) absolute advantage creates specialization among laborers.
D) managers and laborers share job tasks.
7) If a country's production possibilities curve gets more bowed out over time, it is an indication that
A) technological change has taken place.
B) society is learning to use its resources more efficiently.
C) the quantity of labor and capital have increased.
D) resources have become more highly specialized.
8) Generally, specialization leads to
A) constant opportunity costs.
B) greater productivity.
C) the production of fewer capital goods.
D) greater self-reliance.
9) Specialization and the division of labor typically result in
A) cost overruns.
B) increased output.
C) decreased output.
D) a greater reliance upon imports.
10) Absolute advantage is
A) producing at a lower opportunity cost.
B) producing a good using the fewest inputs.
C) producing a good only when demand is high.
D) producing a good that requires imported components.