Macroeconomic test study 3

In most countries today, many goods and services consumed are imported from abroad, and many goods and services produced are exported to foreign customers


Trade can make everybody better off because it

allows people to specialize according to comparative advantage

If China is capable of producing either shows or toy trains or some combination of the two, then

China's opportunity cost of shoes is the inverse of its opportunity cost of toy trains

Trade allows a country to consume its production possibilities frontier


A popular celebrity that is paid highly for her time should probably not mow her own lawn because

Her opportunity cost is mowing her lawn is higher than the cost of paying someone to mow it for her

The opportunity cost of an item

what you give up to get that item

If a country has a lower opportunity cost than its potential trading partner, the country should decide to be self sufficient


Trade between countries

allows each country to consume at a point outside its production possibilities frontier

In an economy consisting of two people producing two goods, it is possible for one person to have the absolute and comparative advantage


It is possible for the US to gain from trade with Germany even if it takes US workers fewer hours to produce every good than it takes German workers


Absolute advantage is found by comparing different producers

input requirements per unit of output

Trade does not benefit a nation if that nation has a comparative advantage in the production of that good


Suppose the US has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that

The US should produce more pork than what it requires and export some of it to Mexico

The production possibilities frontier illustrates

the combinations of output that an economy can produce

A person can benefit from specialization and trade by obtaining a good at a price that is

lower than his or her opportunity cost of that good.

The gains from trade are

a result of more efficient resource allocation than would be observed in the absence of trade

To produce 100 bushels of wheat, Farmer A requires fewer inputs than Farmer B does. We can conclude that Farmer A has an absolute advantage over Farmer B in producing wheat


If Iowa's opportunity cost of corn is lower than Oklahoma's opportunity cost of corn, then

Iowa has a comparative advantage in the production of corn

When an economics points out that you and millions of other people are interdependent, she is referring to the face that we all

Rely upon one another for the goods and services we consume