CHAPTER 03 - Chapter3 InterdependenceandtheGains fromTrade...

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Chapter 3 Interdependence and the Gains from Trade 1. The slope of the production  possibilities frontier is determined  by a. the opportunity  cost of producing  one more unit of the good  on the horizontal axis. b. the market prices of the goods that the economy  can produce. c. the distribution  of incomes in the economy. d. whether  production  is performed  using efficient or inefficient methods. ANSWER: a the opportunity  cost of producing  one more unit of the good  on the horizontal axis. SECTION: 1 OBJECTIVE: 1 2. The production  possibilities frontier is a downward- sloping straight line when  the a. opportunity  cost of producing  each good  depends  on the amount  produced. b. technology of production  is constant. c. opportunity  cost of producing  each good  is independent  of the amount  of the good  produced. d. economy  is industrialized. ANSWER: c opportunity  cost of producing  each good  is independent  of the amount  of the good   produced. SECTION: 1 OBJECTIVE: 1 3. In voluntary  exchange between  two countries, if one country  gains then a. the other must lose, unless the exchange generates external costs. b. the other country  must lose under  any circumstances. c. the other country  must lose an equal amount. d. there is no reason to expect that the other country must  lose. ANSWER: d there is no reason to expect that the other country must  lose. SECTION: 1 OBJECTIVE: 1 4. International trade tends to occur whenever a. labor is cheaper in one country  than  in another. b. one of the trading  nations is self sufficient and  producing  surplus  goods. c. one nation can profit from trade at the expense of the other. d. both nations can benefit from trade. ANSWER: d both nations can benefit from trade. SECTION: 1 OBJECTIVE: 1 5. If Japan can produce each unit of steel using fewer resources than Canada  does,  a. Canada  has an absolute advantage  in steel production. b. Japan has an absolute advantage  in steel production.  c. Japan has a comparative advantage  in steel production. d. Canada  has a comparative advantage  in steel production. ANSWER: b Japan has an absolute advantage  in steel production. SECTION: 2 OBJECTIVE: 2 13
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14    Chapter 3/Interdependence and the Gains from Trade 6. Which of the following  statements  is true? a.
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CHAPTER 03 - Chapter3 InterdependenceandtheGains fromTrade...

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