164. Refer to Figure 3-4. Which of the following is not correct? a. b. c. d. Perry and Jordan could each consume 2 novels and 6 poems without trade. Jordan could consume 2 novels and 6 poems both with and without trade. Perry and Jordan could each consume 2 novels and 6 poems with trade. Perry and Jordan could each consume 12 poems without trade. ANS: A 165. Refer to Figure 3-4. Suppose Perry is willing to trade 4 poems to Jordan for each novel that Jordan writes and sends to Perry. Which of the following combinations of novels and poems could Jordan then consume, assuming Jordan specializes in novel production and Perry specializes in poem production? a. b. c. d. 1 novel and 14 poems 2 novels and 8 poems 3 novels and 6 poems 4 novels and 2 poems ANS: B 166. Refer to Figure 3-4. Perry has an absolute advantage in the production of a. b. c. d. novels and Jordan has an absolute advantage in the production of poems. poems and Jordan has an absolute advantage in the production of novels. novels and Jordan has an absolute advantage in the production of neither good. neither good and Jordan has an absolute advantage in the production of novels. ANS: D 167. Refer to Figure 3-4. Perry has a comparative advantage in the production of a. b. c. d. novels and Jordan has a comparative advantage in the production of poems. poems and Jordan has a comparative advantage in the production of novels. novels and Jordan has a comparative advantage in the production of neither good. neither good and Jordan has a comparative advantage in the production of novels. ANS: B 168. Refer to Figure 3-4. Perry should specialize in the production of a. b. c. d. novels. poems. both goods. neither good. ANS: B 169. Refer to Figure 3-4. Jordan should specialize in the production of a. b. c. d. ANS: A novels. poems. both goods. neither good. 170. Refer to Figure 3-4. If Perry and Jordan switch from each person dividing their time equally between the production of novels and poems to each person spending all of their time producing the good in which they have a comparative advantage, then total production of novels will increase by a. b. c. d. 1. 2. 3. 4. ANS: A 171. Refer to Figure 3-4. If Perry and Jordan each spends all their time producing the good in which they have a comparative advantage and trade takes place at a price of 1 novel for 7 poems, then a. b. c. d. Perry and Jordan will both gain from this trade. Perry will gain from this trade, but Jordan will not. Jordan will gain from this trade, but Perry will not. neither Perry nor Jordan will gain from this trade. ANS: C Figure 3-5 Puneet’s Production Possibilities Frontier Chirag’s Production Possibilities Frontier wallets 10 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 1 2 3 4 5 6 7 8 9 10 purses wallets 1 2 3 4 5 6 7 8 9 10 purses 172. Refer to Figure 3-5. If Puneet must work 0.5 hour to make each purse, then his production possibilities frontier is based on how many hours of work? a. b. c. d. ANS: B 2 hours 5 hours 20 hours 50 hours 173. Refer to Figure 3-5. If the production possibilities frontier shown for Chirag is for 8 hours of work, then how long does it take Chirag to make one purse? a. b. c. d. 1/2 hour 2 hours 4 hours 8 hours ANS: B 174. Refer to Figure 3-5. If Puneet and Chirag both spend all of their time making wallets, then total production is a. b. c. d. 7 wallets. 8 wallets. 14 wallets. 28 wallets. ANS: C 175. Refer to Figure 3-5. If Puneet and Chirag each divides his time equally between making purses and making wallets, then total production is a. b. c. d. 4 purses and 8 wallets. 7 purses and 7 wallets. 10 purses and 6 wallets. 14 purses and 14 wallets. ANS: B 176. Refer to Figure 3-5. Puneet’s opportunity cost of one purse is a. b. c. d. 4/5 wallet and Chirag’s opportunity cost of one purse is 2/3 wallet. 4/5 wallet and Chirag’s opportunity cost of one purse is 3/2 wallets. 5/4 wallets and Chirag’s opportunity cost of one purse is 2/3 wallet. 5/4 wallets and Chirag’s opportunity cost of one purse is 3/2 wallets. ANS: B 177. Refer to Figure 3-5. Puneet’s opportunity cost of one wallet is a. b. c. d. 4/5 purse and Chirag’s opportunity cost of one wallet is 2/3 purse. 4/5 purse and Chirag’s opportunity cost of one wallet is 3/2 purses. 5/4 purses and Chirag’s opportunity cost of one wallet is 2/3 purse. 5/4 purses and Chirag’s opportunity cost of one wallet is 3/2 purses. ANS: C 178. Refer to Figure 3-5. Puneet has an absolute advantage in the production of a. b. c. d. ANS: C purses and Chirag has an absolute advantage in the production of wallets. wallets and Chirag has an absolute advantage in the production of purses. both goods and Chirag has an absolute advantage in the production of neither good. neither good and Chirag has an absolute advantage in the production of both goods. 179. Refer to Figure 3-5. Puneet has a comparative advantage in the production of a. b. c. d. purses and Chirag has a comparative advantage in the production of wallets. wallets and Chirag has a comparative advantage in the production of purses. both goods and Chirag has a comparative advantage in the production of neither good. neither good and Chirag has a comparative advantage in the production of both goods. ANS: A 180. Refer to Figure 3-5. Puneet should specialize in the production of a. b. c. d. purses. wallets. both goods. neither good. ANS: A 181. Refer to Figure 3-5. Chirag should specialize in the production of a. b. c. d. purses. wallets. both goods. neither good. ANS: B 182. Refer to Figure 3-5. If Puneet and Chirag switch from each person dividing his time equally between the production of purses and wallets to each person spending all of his time producing the good in which he has a comparative advantage, then total production of purses will increase by a. b. c. d. 2. 3. 5. 10. ANS: B 183. Refer to Figure 3-5. At which of the following prices would both Puneet and Chirag gain from trade with each other? a. b. c. d. ANS: C 5 wallets for 1.25 purses 5 wallets for 2.5 purses 5 wallets for 3.75 purses Puneet and Chirag could not both gain from trade with each other at any price. Figure 3-6 Maxine’s Production Possibilities Frontier Daisy’s Production Possibilities Frontier tarts 20 20 18 18 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 3 6 9 12 15 18 21 24 27 30 pies tarts 3 6 9 12 15 18 21 24 27 30 pies 184. Refer to Figure 3-6. If Daisy must work 2.5 hours to make each pie, then her production possibilities frontier is based on how many hours of work? a. b. c. d. 6 hours 7.5 hours 37.5 hours 50 hours ANS: C 185. Refer to Figure 3-6. If the production possibilities frontier shown for Maxine is for 3 hours of work, then how long does it take Maxine to make one pie? a. b. c. d. 1/4 hour 1/3 hour 3 hours 4 hours ANS: A 186. Refer to Figure 3-6. If Maxine and Daisy each divides her time equally between making pies and making tarts, then total production is a. b. c. d. ANS: D 6 pies and 10 tarts. 7.5 pies and 3 tarts. 7.5 pies and 10 tarts. 13.5 pies and 13 tarts. 187. Refer to Figure 3-6. If the production possibilities frontiers shown are each for one day of work, then which of the following combinations of pies and tarts could Maxine and Daisy together make in a given day? a. b. c. d. 6 pies and 24 tarts 8 pies and 22 tarts 14 pies and 18 tarts 18 pies and 14 tarts ANS: B 188. Refer to Figure 3-6. If the production possibilities frontiers shown are each for one day of work, then which of the following combinations of pies and tarts could Maxine and Daisy together not make in a given day? a. b. c. d. 2 pies and 25 tarts 10 pies and 22 tarts 12 pies and 15 tarts 15 pies and 16 tarts ANS: B 189. Refer to Figure 3-6. Suppose Maxine decides to increase her production of tarts by 5. What is the opportunity cost of this decision? a. b. c. d. 2/5 pie 2 pies 5/2 pies 10 pies ANS: D 190. Refer to Figure 3-6. Suppose Daisy decides to increase her production of pies by 6. What is the opportunity cost of this decision? a. b. c. d. 8/3 tarts 4.5 tarts 8 tarts 10 tarts ANS: C 191. Refer to Figure 3-6. Suppose Daisy is willing to trade 3/4 tart to Maxine for each pie that Maxine makes and sends to Daisy. Which of the following combinations of pies and tarts could Maxine not then consume, assuming Maxine specializes in making pies and Daisy specializes in making tarts? a. b. c. d. ANS: B 4 pies and 6 tarts 6 pies and 5 tarts 8 pies and 3 tarts 10 pies and 1.5 tarts 192. Refer to Figure 3-6. Maxine has an absolute advantage in the production of a. b. c. d. both goods and a comparative advantage in the production of pies. both goods and a comparative advantage in the production of tarts. neither good and a comparative advantage in the production of pies. neither good and a comparative advantage in the production of tarts. ANS: C 193. Refer to Figure 3-6. Daisy has an absolute advantage in the production of a. b. c. d. both goods and a comparative advantage in the production of pies. both goods and a comparative advantage in the production of tarts. neither good and a comparative advantage in the production of pies. neither good and a comparative advantage in the production of tarts. ANS: B 194. Refer to Figure 3-6. If Maxine and Daisy switch from each person dividing her time equally between the production of pies and tarts to each person spending all of her time producing the good in which she has a comparative advantage, then total production of tarts will increase by a. b. c. d. 7. 10. 17. 20. ANS: A 195. Refer to Figure 3-6. At which of the following prices would both Maxine and Daisy gain from trade with each other? a. b. c. d. ANS: B 4 tarts for 2 pies 8 tarts for 12 pies 12 tarts for 28 pies Maxine and Daisy could not both gain from trade with each other at any price. Figure 3-7 Bintu’s Production Possibilities Frontier Juba’s Production Possibilities Frontier cups 10 10 9 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 1 2 3 4 5 6 7 8 bowls cups 1 2 3 4 5 6 7 8 bowls 196. Refer to Figure 3-7. If Bintu must work 2 hours to make each cup, then her production possibilities frontier is based on how many hours of work? a. b. c. d. 2 hours 4 hours 8 hours 16 hours ANS: D 197. Refer to Figure 3-7. If the production possibilities frontier shown for Juba is for 2 hours of work, then how long does it take Juba to make one bowl? a. b. c. d. 1/8 hour 1/2 hour 2 hours 8 hours ANS: B 198. Refer to Figure 3-7. If Bintu and Juba both spend all of their time making bowls, then total production is a. b. c. d. 2 bowls. 3 bowls. 4 bowls. 6 bowls. ANS: D 199. Refer to Figure 3-7. If Bintu and Juba each divides her time equally between making bowls and making cups, then total production is a. b. c. d. ANS: B 2 bowls and 6 cups. 3 bowls and 7 cups. 4 bowls and 8 cups. 6 bowls and 14 cups. 200. Refer to Figure 3-7. If the production possibilities frontiers shown are each for 4 hours of work, then which of the following combinations of bowls and cups could Bintu and Juba together make in a given 4-hour production period? a. b. c. d. 1 bowl and 14 cups 2 bowls and 11 cups 3 bowls and 10 cups 5 bowls and 5 cups ANS: B 201. Refer to Figure 3-7. If the production possibilities frontiers shown are each for 4 hours of work, then which of the following combinations of bowls and cups could Bintu and Juba together not make in a given 4-hour production period? a. b. c. d. 3 bowls and 9.5 cups 4.5 bowls and 6 cups 5 bowls and 4 cups 6 bowls and 1 cups ANS: D 202. Refer to Figure 3-7. The opportunity cost of 1 bowl for Bintu is a. b. c. d. 1/4 cup. 1/2 cup. 2 cups. 4 cups. ANS: D 203. Refer to Figure 3-7. The opportunity cost of 1 bowl for Juba is a. b. c. d. 1/4 cup. 2/3 cup. 3/2 cups. 4 cups. ANS: C 204. Refer to Figure 3-7. The opportunity cost of 1 cup for Bintu is a. b. c. d. 1/8 bowl. 1/4 bowl. 4 bowls. 8 bowls. ANS: B 205. Refer to Figure 3-7. The opportunity cost of 1 cup for Juba is a. b. c. d. ANS: B 1/6 bowl. 2/3 bowl. 3/2 bowls. 6 bowls. 206. Refer to Figure 3-7. Suppose Juba is willing to trade one bowl to Bintu for every two cups that Bintu makes and sends to Juba. Which of the following combinations of bowls and cups could Bintu then consume, assuming Bintu specializes in making cups and Juba specializes in making bowls? a. b. c. d. 1 bowl and 7 cups 2 bowls and 4 cups 3 bowls and 3 cups 4 bowls and 1 cup ANS: B 207. Refer to Figure 3-7. Bintu has an absolute advantage in the production of a. b. c. d. bowls and Juba has an absolute advantage in the production of cups. cups and Juba has an absolute advantage in the production of bowls. both goods and Juba has an absolute advantage in the production of neither good. neither good and Juba has an absolute advantage in the production of both goods. ANS: B 208. Refer to Figure 3-7. Bintu has a comparative advantage in the production of a. b. c. d. bowls and Juba has a comparative advantage in the production of cups. cups and Juba has a comparative advantage in the production of bowls. both goods and Juba has a comparative advantage in the production of neither good. neither good and Juba has a comparative advantage in the production of both goods. ANS: B 209. Refer to Figure 3-7. If Bintu and Juba switch from each person dividing her time equally between the production of cups and bowls to each person spending all of her time producing the good in which she has a comparative advantage, then total production will increase by a. b. c. d. ANS: A 1 bowl and 1 cup. 2 bowls and 4 cups. 3 bowls and 5 cups. 4 bowls and 8 cups. Figure 3-8 Belgium’s Production Possibilities Frontier pancakes 20 Latvia’s Production Possibilities Frontier 20 18 18 16 16 14 14 12 12 10 10 8 8 6 6 4 4 2 2 2 4 6 8 10 12 14 16 18 20 waffles pancakes 2 4 6 8 10 12 14 16 18 20 waffles 210. Refer to Figure 3-8. If Belgium and Latvia each divides its time equally between making waffles and making pancakes, then total production is a. b. c. d. 12 waffles and 12 pancakes. 14 waffles and 9 pancakes. 16 waffles and 6 pancakes. 28 waffles and 18 pancakes. ANS: B 211. Refer to Figure 3-8. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of waffles and pancakes could Belgium and Latvia together make in a given day? a. b. c. d. 4 waffles and 16 pancakes 8 waffles and 15 pancakes 16 waffles and 10 pancakes 24 waffles and 4 pancakes ANS: A 212. Refer to Figure 3-8. If the production possibilities frontiers shown are each for one day of production, then which of the following combinations of waffles and pancakes could Belgium and Latvia together not make in a given day? a. b. c. d. ANS: A 4 waffles and 17 pancakes 8 waffles and 14 pancakes 16 waffles and 9 pancakes 24 waffles and 3 pancakes 213. Refer to Figure 3-8. Belgium’s opportunity cost of one waffle is a. b. c. d. 3/4 pancake and Latvia’s opportunity cost of one waffle is 1/2 pancake. 3/4 pancake and Latvia’s opportunity cost of one waffle is 2 pancakes. 4/3 pancakes and Latvia’s opportunity cost of one waffle is 1/2 pancake. 4/3 pancakes and Latvia’s opportunity cost of one waffle is 2 pancakes. ANS: A 214. Refer to Figure 3-8. Belgium would incur an opportunity cost of 36 waffles if it increased its production of pancakes by a. b. c. d. 12. 27. 30. 48. ANS: B 215. Refer to Figure 3-8. Belgium has an absolute advantage in the production of a. b. c. d. waffles and Latvia has an absolute advantage in the production of pancakes. pancakes and Latvia has an absolute advantage in the production of waffles. both goods and Latvia has an absolute advantage in the production of neither good. neither good and Latvia has an absolute advantage in the production of both goods. ANS: C 216. Refer to Figure 3-8. Belgium has a comparative advantage in the production of a. b. c. d. waffles and Latvia has a comparative advantage in the production of pancakes. pancakes and Latvia has a comparative advantage in the production of waffles. both goods and Latvia has a comparative advantage in the production of neither good. neither good and Latvia has a comparative advantage in the production of both goods. ANS: B 217. Refer to Figure 3-8. If Belgium and Latvia switch from each country dividing its time equally between the production of waffles and pancakes to each country spending all of its time producing the good in which it has a comparative advantage, then total production of pancakes will increase by a. b. c. d. 3. 6. 9. 12. ANS: A 218. Refer to Figure 3-8. At which of the following prices would both Belgium and Latvia gain from trade with each other? a. b. c. d. ANS: A 6 pancakes for 9 waffles 8 pancakes for 20 waffles 11 pancakes for 33 waffles Belgium and Latvia could not both gain from trade with each other at any price. 219. Refer to Figure 3-8. If Belgium and Latvia each spends all its time producing the good in which it has a comparative advantage and the countries agree to trade 7 waffles for 5 pancakes, then Belgium will consume a. b. c. d. 7 waffles and 7 pancakes and Latvia will consume 5 waffles and 5 pancakes. 7 waffles and 7 pancakes and Latvia will consume 5 waffles and 11 pancakes. 23 waffles and 7 pancakes and Latvia will consume 5 waffles and 5 pancakes. 23 waffles and 7 pancakes and Latvia will consume 5 waffles and 11 pancakes. ANS: A 220. Refer to Figure 3-8. Belgium and Latvia would not be able to gain from trade if Latvia's opportunity cost of one pancake changed to a. b. c. d. 1/2 waffle. 3/4 waffle. 4/3 waffles. 2 waffles. ANS: C 221. Refer to Figure 3-8. Belgium should specialize in the production of a. b. c. d. waffles and import pancakes. pancakes and import waffles. both goods and import neither good. neither good and import both goods. ANS: B 222. Refer to Figure 3-8. Latvia should specialize in the production of a. b. c. d. ANS: A waffles and import pancakes. pancakes and import waffles. both goods and import neither good. neither good and import both goods. Figure 3-9 Uzbekistan’s Production Possibilities Frontier Azerbaijan’s Production Possibilities Frontier nails 100 100 90 90 80 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 5 10 15 20 25 30 35 40 45 50 bolts nails 5 10 15 20 25 30 35 40 45 50 bolts 223. Refer to Figure 3-9. If Uzbekistan and Azerbaijan each divides its time equally between making bolts and making nails, then total production is a. b. c. d. 15 bolts and 40 nails. 25 bolts and 70 nails. 30 bolts and 80 nails. 50 bolts and 140 nails. ANS: B 224. Refer to Figure 3-9. If the production possibilities frontiers shown are each for two days of production, then which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together make in a given 2-day production period? a. b. c. d. 12 bolts and 120 nails 24 bolts and 96 nails 38 bolts and 50 nails 44 bolts and 24 nails ANS: D 225. Refer to Figure 3-9. If the production possibilities frontiers shown are each for two days of production, then which of the following combinations of bolts and nails could Uzbekistan and Azerbaijan together not make in a given 2-day production period? a. b. c. d. ANS: D 9 bolts and 122 nails 21 bolts and 98 nails 36 bolts and 56 nails 46 bolts and 18 nails 226. Refer to Figure 3-9. Azerbaijan’s opportunity cost of one nail is a. b. c. d. 1/4 bolt and Uzbekistan’s opportunity cost of one nail is 1/2 bolt. 1/4 bolt and Uzbekistan’s opportunity cost of one nail is 2 bolts. 4 bolts and Uzbekistan’s opportunity cost of one nail is 1/2 bolt. 4 bolts and Uzbekistan’s opportunity cost of one nail is 2 bolts. ANS: A 227. Refer to Figure 3-9. Suppose Uzbekistan decides to increase its production of bolts by 10. What is the opportunity cost of this decision? a. b. c. d. 1/2 nail 2 nails 5 nails 20 nails ANS: D 228. Refer to Figure 3-9. Suppose Azerbaijan is willing to trade 3 nails to Uzbekistan for every bolt that Uzbekistan makes and sends to Azerbaijan. Which of the following combinations of bolts and nails could Azerbaijan then consume, assuming Uzbekistan specializes in making bolts and Azerbaijan specializes in making nails? a. b. c. d. 8 bolts and 56 nails 14 bolts and 44 nails 18 bolts and 32 nails 20 bolts and 26 nails ANS: A 229. Refer to Figure 3-9. Uzbekistan has an absolute advantage in the production of a. b. c. d. bolts and a comparative advantage in the production of bolts. bolts and a comparative advantage in the production of nails. nails and a comparative advantage in the production of bolts. nails and a comparative advantage in the production of nails. ANS: A 230. Refer to Figure 3-9. Azerbaijan has an absolute advantage in the production of a. b. c. d. ANS: D bolts and a comparative advantage in the production of bolts. bolts and a comparative advantage in the production of nails. nails and a comparative advantage in the production of bolts. nails and a comparative advantage in the production of nails. 231. Refer to Figure 3-9. If Uzbekistan and Azerbaijan switch from each country dividing its time equally between the production of bolts and nails to each country spending all of its time producing the good in which it has a comparative advantage, then total production will increase by a. b. c. d. 5 bolts and 10 nails. 15 bolts and 40 nails. 20 bolts and 50 nails. 30 bolts and 80 nails. ANS: A 232. Refer to Figure 3-9. If Uzbekistan and Azerbaijan each spends all its time producing the good in which it has a comparative advantage and trade takes place at a price of 12 bolts for 36 nails, then a. b. c. d. neither Uzbekistan nor Azerbaijan will gain from this trade. Uzbekistan will gain from this trade, but Azerbaijan will not. Azerbaijan will gain from this trade, but Uzbekistan will not. both Uzbekistan and Azerbaijan will gain from this trade. ANS: D 233. Refer to Figure 3-9. Without trade, Uzbekistan produced and consumed 12 bolts and 36 nails and Azerbaijan produced and consumed 14 bolts and 24 nails. Then, each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 16 bolts for 38 nails. As a result, Uzbekistan gained a. b. c. d. ANS: A 2 bolts and 2 nails and Azerbaijan gained 2 bolts and 18 nails. 4 bolts and 2 nails and Azerbaijan gained 2 bolts and 14 nails. 14 bolts and 38 nails and Azerbaijan gained 16 bolts and 42 nails. 16 bolts and 38 nails and Azerbaijan gained 16 bolts and 38 nails.