Question 1 Which of the following statement is correct? Trade can make everybody

Question

Question 1

Which of the following statement is correct?

Trade can make everybody better off because it increases cooperation among nations.

Trade can make everybody better off because it allows people to specialize according to comparative advantage.

Trade can make everybody better off because it requires some workers in an economy to be retrained.

Trade can make everybody better off because it reduces competition among domestic companies.

Question 2

The reason that would cause a movement along a demand curve is   

a) Income of the buyer

b) Availability of close substitutes

c) A change in the price of the good itself.

d) None of the above

Question 3

Among the following which one is the characteristic of perfectly competitive market?

a) There are lots of buyers and sellers

b) Free entry and exit

c) All of the above

Question 4

A supple curve shifts when there is a change in

a) Input prices

b) Technology

c) Number of sellers in the market

d) All of the above

Question 5

Suppose there is a shortage in the market for avocados. Assuming a competitive and unrestrained market, what happens over time?

a) The price of avocados will fall, and the shortage will worsen

b) The price of avocados will rise, and the market will eventually reach equilibrium

c) The price of avocados will rise, and a large surplus will be created

d) Producers will stop growing avocados

Question 6

Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate.

Quantity Produced in 1 Hour

Bushels of Wheat

Yards of Cloth

8

12

6

15

Refer to Table. Falda has an absolute advantage in the production of

wheat.

cloth.

both goods.

neither good.

Question 7

Assume that Bonnie and Gary can switch between producing corn and producing pork at a constant rate.

Minutes Needed to Make 1

Bushel of corn

Pound of pork

30

15

15

5

Refer to Table. Assume that Bonnie and Gary each has 480 minutes available. If each person produces the product in which they have comparative advantage then the total production will be

a.

24 bushels of corn and 64 pounds of pork.

21 bushels of corn and 33 pounds of pork.

16 bushels of corn and 96 pounds of pork.

5 bushels of corn and 24 pounds of pork.

Question 8

Labor Hours Needed to Make 1 Pound of

Amount Produced in 40 Hours

Chicken Salad

Fruit Salad

Chicken Salad

Fruit Salad

Kevin

8 hours/pound

5 hours/pound

5 pounds

8 pounds

Chris

4 hours/pound

10 hours/pound

10 pounds

4 pounds

Refer to Table. Which of the following combinations of chicken salad and fruit salad could the Kevin produce in 40 hours?

a.

1 pound of chicken salad and 7.5 pounds of fruit salad.

b.

2.3 pounds of chicken salad and 5 pounds of fruit salad.

c.

3 pounds of chicken salad and 3.2 pounds of fruit salad.

d.

4.5 pounds of chicken salad and 2 pounds of fruit salad.

a.

Trade can make everybody better off because it increases cooperation among nations.

b.

Trade can make everybody better off because it allows people to specialize according to comparative advantage.

c.

Trade can make everybody better off because it requires some workers in an economy to be retrained.

d.

Trade can make everybody better off because it reduces competition among domestic companies.

Explanation / Answer

Question 1

Comparative advantage is considered as the basis of trade.

Comparative advantage enable the country to specialize in the good in which it enjoys comparative advantage.

This leads to greater production and eventually the greater consumption and make the country better-off.

So, it can be stated that trade can make everybody better off because it allows people to specialize according to the comparative advantage.

Hence, the correct answer is the option (b).

Question 2

Movement along the demand curve happens when there is change in own price of the commodity.

So,

The reason that would cause a movement along the demand curve is a change in the price of the good itself.

Hence, the correct answer is the option (c).

Question 3

Following are some major characteristics of perfectly competitive market -

1. Large number of buyers and sellers

2. Homogeneous product

3. Free entry and exit of firms

4. Perfect knowledge

5. Perfect mobility of factors of production.

Hence, the correct answer is the option (c).

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