CHAPTER 16-3.pdf - MULTIPLE CHOICE QUESTIONS TESTBANK \u2013 CHAPTER 16 Go to memorandum Answer the following questions by selecting the appropriate answer

CHAPTER 16-3.pdf - MULTIPLE CHOICE QUESTIONS TESTBANK...

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© VAN SCHAIK PUBLISHERS M ULTIPLE C HOICE Q UESTIONS T ESTBANK C HAPTER 16 Go to memorandum Answer the following questions by selecting the appropriate answer from the list below. Question 1 South Africa has a comparative (relative) advantage over France in the production of maize if it: A. produces maize with fewer material inputs than France. B. can match France’s output of maize and have resources left over. C. can produce maize with the same resources as France but faster. D. has an absolute advantage over France. E. produces maize at a lower opportunity cost than France. Question 2 Australia has an absolute advantage over South Africa in wool production if, during a year, Australia: A. can produce more wool than South Africa. B. specialises in wool production. C. can produce less wool than South Africa D. can produce more wool than South Africa with a given amount of resources. E. consumes more wool than South Africa on average. Question 3 If two countries have differing opportunity costs of production for two goods, then: A. each country should specialise in the good for which it has a higher opportunity cost of production. B. only the country with an absolute advantage in the production of both goods stands to gain from trade. C. each country should purchase inputs from the other country in order to gain an absolute advantage. D. each country should specialise in the production of the good for which it has a relative advantage. E. each country should import all goods instead of producing them domestically.
© VAN SCHAIK PUBLISHERS Question 4 Consider the case of two countries, Afghanistan and the US, both producing carpets and fighter aircraft. The tale below shows output rates per day in the two countries if all resources are fully and efficiently employed. Use this information to answer Question (a), (b) and (c). Carpets Fighter aircraft Afghanistan 100 4 US 500 25 Question (a) Based on this information: A. there is no opportunity for mutually beneficial trade between the two countries. B. Afghanistan has an absolute advantage in the production of both goods. C. Afghanistan should import carpets from the US. D. Afghanistan has a comparative advantage in the production of aircraft. E. the US should export fighter aircraft to Afghanistan. Question (b) An appropriate international exchange ratio that would allow mutually advantageous trade to take place would be: A. 1 aircraft = 25 carpets. B. 1 aircraft = 20 carpets. C. 1 carpet = 4 aircraft. D. 1 carpet = 0,04 aircraft.

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