chapter 3 true and false Flashcards Preview

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Flashcards in chapter 3 true and false Deck (15):
1

If Japan has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item

false; absolute advantage compares the quantities of inputs used in production, while comparative advantage compares the opportunity costs

2

comparative advantage, not absolute advantage, determines the decision to specialize in production

true

3

absolute advantage is a comparison based on productivity

true

4

self-sufficiency is the best way to increase one's material welfare

false,; restricting trade eliminates gains from trade

5

comparative advantage is a comparison based on opportunity cost

true

6

if a producer is self-sufficient, the PPF is also the consumption possibilities frontier

true

7

if a country's workers can produce 6 pencils per hour or 18 rules per hour absent trade, the price of 1 rule is pencils

false; the price of 1 rules is one third of a pencil

8

if producers have different opportunity costs of production, trade will allow them to consume outside their production possibilities frontiers

true

9

countries import goods for which they have a comparative advantage

false; countries export goods in which they have a comparative advantage

10

hard work can enhance comparative advantage

true

11

the gains form trade can be measured by the increase in total production and consumption that comes form specialization

true

12

when a country removes a specific import restriction, it always benefits every worker in that country

false; it may harm those involved in that industry

13

Canada has a comparative advantage in the production of pulp and paper

true

14

if an advanced country has an absolute advantage in the production of everything, it will benefit if it eliminates trade with less developed countries and becomes completely self-sufficient

f; voluntary trade benefits all traders

15

if gains from trade are based solely on comparative advantage, and if all countries have the same opportunity costs of production, then there are no gains from trade.

true