Week 2: Comparative Advantage & MCQ Quiz

Question 1

Referring to the textbook (Chapter 3, Problems and Applications, Question 2 in 8th edition/Question 3 in 7th edition), does Japan have a comparative advantage in producing cars? (3)

Answer 1

True:

1.
2.
3.

Question 2

The opportunity cost of obtaining more of one good is shown in the production possibilities frontier as the:

Answer 2

The amount of the other good that must be given up.

Question 3

Referring to the textbook (Ch 3., Q2 in 8th edition or Q3 in 7th), Australia has an absolute advantage in producing grain? (2)

Answer 3

True

An absolute advantage is:

Question 4

Referring to the textbook (Ch 3, Q3/4), who has the comparative advantage in pizza making?

Answer 4

Rachel BECAUSE:

Question 5

In order to have a linear production possibilities frontier (one that is not bowed out), it must be that:

Answer 5

The trade-off between two goods is constant

Question 6

Melissa is a self-employed lawyer who goes to a restaurant 2 miles from home over a cheaper restaurant 15 miles from home. Which of the following is the most likely explanation for her behaviour?

Answer 6

The higher monetary cost of the more expensive restaurant is offset by the higher opportunity cost of the lower-price restaurant.

Question 7

The marginal cost of something is what you would give up to get one extra unit of a good.

Answer 7

True.

Question 8

Suppose a student has an hour before their next class starts. They can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is:

Answer 8

Impossible to determine because the most preferred alternative is not known.

Question 9

The two best reasons for a government to intervene in a market are to:

Answer 9

Promote equity and efficiency.

Question 10

Society faces a trade-off between equity and efficiency because:

Answer 10

Often it is not possible to distribute resources fairly

Question 11

How does comparative advantage differ from absolute advantage (3)

Answer 11

Absolute advantage refers to the ability to produce more or better goods and services than somebody else.
Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost, not necessarily at a greater volume.
A way of thinking about it is the best option given a trade-off. If you’re comparing two different options, each of which has a trade-off (some benefits as well as some disadvantages), the one with the best overall package is the one with the comparative advantage.
An example of this would be a country exporting goods that they are able to manufacture at a lower opportunity cost.

Question 12

Explain and provide an example of increasing opportunity cost. Use a production possibilities frontier (PPF).

Answer 12

A

Question 13

Identify 3 factors that can shift the menu of production possibilities:

Answer 13

A
B
C

Question 14

What is the role of comparative advantage in international trade?

Answer 14

A

Question 15

Describe why some jobs are more vulnerable to outsourcing than others? (3)

Answer 15

CHECK ANSWER: Comparative advantage. Other companies, countries or party may be able to provide services for cheaper than what it would cost in other countries. This could be because:
1. Cheap cost of labour in some countries: If the job could be done over the internet, it may be cheaper to hire overseas or outsource.
2.

Question 16

What factors have led to cognition overload and what has it resulted in?

Answer 16

An increasing amount of choices that they have to make every day. It has resulted in a majority of buyers who did not follow through on an intended purchase just because they were cognitively overwhelmed by information and choice.

“Consumers tend to reward companies that drive down their mental load, and many brands, including Aldi, Netflix and Google, owe some of their success to their ability to simplify consumers’ experiences” - Dr Gruner

Analysis paralysis.

Question 17

What are the ‘costs’ of choice and cognitive overload?

Answer 17

More time required to make purchases, if even made at all.

Question 18

Why does the gender pay gap matter? Reflect and try to apply some of the concepts learned so far.

Answer 18

1. There is a different opportunity cost between men and women to complete the same job. Men will value their time more because they can get paid more in that time.
   2.
   3.