1. In an hour, David can wash 2 cars or mow 1 lawn, and Ron can wash 3 cars or mow 1 lawn. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?
a. David in washing, Ron in mowing.
b. Ron in washing, David in mowing.
c. David in washing, neither in mowing.
d. Ron in washing, neither in mowing.
2. Once again, in an hour, David can wash 2 cars or mow 1 lawn, and Ron can wash 3 cars or mow 1 lawn. Who has the comparative advantage in car washing, and who has the comparative advantage in lawn mowing?
a. David in washing, Ron in mowing.
b. Ron in washing, David in mowing.
c. David in washing, neither in mowing.
d. Ron in washing, neither in mowing.
3. When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,
a. they both obtain consumption outside their production possibilities frontier.
b. they both obtain consumption inside their production possibilities frontier.
c. one individual consumes inside her production possibilities frontier, while the other consumes outside hers.
d. each individual consumes a point on her own production possibilities frontier.
4. Which goods will a nation typically import?
a. those goods in which the nation has an absolute advantage
b. those goods in which the nation has a comparative advantage
c. those goods in which other nations have an absolute advantage
d. those goods in which other nations have a comparative advantage
5. Suppose that in the United States, producing an aircraft takes 10,000 hours of labor and producing a shirt takes 2 hours of labor. In China, producing an aircraft takes 40,000 hours of labor and producing a shirt takes 4 hours of labor. What will these nations trade?
a. China will export aircraft, and the United States will export shirts.
b. China will export shirts, and the United States will export aircraft.
c. Both nations will export shirts.
d. There are no gains from trade in this situation.
6. Mark can cook dinner in 30 minutes and wash the laundry in 20 minutes. His roommate takes half as long to do each task. How should the roommates allocate the work?
a. Mark should do more of the cooking based on his comparative advantage.
b. Mark should do more of the washing based on his comparative advantage.
c. Mark should do more of the washing based on his absolute advantage.
d. There are no gains from trade in this situation.