ch03 - Chapter3 InterdependenceandtheGainsfromTrade...

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Chapter 3 Interdependence and the Gains from Trade MULTIPLE CHOICE 1 . People who provide you with goods and services a. are acting out of generosity. b. are acting because they like you. c. do so because they get something in return. d. are required to do so by government. 2 . A rancher can produce only hamburgers, and a farmer can produce only french fries. The rancher and the farmer both like both  foods. They a. cannot gain from trade. b. could gain from trade under certain circumstances, but not always. c. could gain from trade because each would enjoy a greater variety of food. d. could gain from trade only if each were indifferent between hamburgers and french fries. 3 . Regan grows flowers and makes ceramic vases. Jayson also grows flowers and makes vases, but Regan is better at producing  both. In this case, trade could a. benefit both Jayson and Regan. b. benefit Jayson, but not Regan. c. benefit Regan, but not Jayson. d. not benefit Jayson nor Regan. 4 . Without trade a. a country is better off because it will become self-sufficient.
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b. a country’s production possibilities frontier is also its consumption possibilities frontier. c. a country can still benefit from international specialization. d. more product variety is available in a country. 5 . With trade a a. country is worse off because it becomes dependent on other countries. b. country will produce a greater variety of goods and services to trade. c. country’s consumption possibilities frontier can be outside its production possibilities frontier. d. country will experience a lower unemployment rate. 6 . A country’s consumption possibilities frontier can be outside its production possibilities frontier if a. additional resources become available. b. there is an increase in the level of technology. c. the country engages in trade. d. All of the above are correct. e. Both a and b are correct. 7 . A production possibilities frontier will be linear and not bowed out if a. no tradeoffs exist. b. the tradeoff between the two goods is always at a constant rate. c. unemployment is zero. d. resources are allocated efficiently. 8 . The difference between production possibilities frontiers that are bowed out and those that are linear is that a. bowed out production possibilities frontiers illustrate tradeoffs where linear production possibilities frontiers do not. b. bowed out production possibilities frontiers show increasing opportunity cost where linear ones show constant opportunity  cost. c.
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This note was uploaded on 04/14/2010 for the course ECON Econ 102 taught by Professor Kimball during the Winter '09 term at Harvard.

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ch03 - Chapter3 InterdependenceandtheGainsfromTrade...

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