1. For both parties to gain from trade: (1) both parties must have an absolute advantage in the good they produce. (2) one party must have an opportunity cost of zero. (3) the price at which they trade must lie between the two opportunity costs of the parties. (4) one party should focus on imports while the other should focus on exports. 2. Which of the following statements is TRUE in an economy where only two goods are produced? (1) If a person's opportunity cost of one good is relatively high, his opportunity cost of the other good must be relatively high as well. (2) If two people have exactly the same opportunity cost, one will have a comparative advantage. (3) It is impossible for one person to have a comparative advantage in both goods. (4) It is impossible for one person to have an absolute advantage in both goods. 3. If labour in Mexico is less productive than labour in Canada in all areas of production, then: (1) neither nation can benefit from trade. (2) Mexico can benefit from trade, but Canada cannot. 3) Mexico will not have a comparative advantage in any good. (4) both nations can benefit by producing and exporting goods in which they have a comparative advantage. THE NEXT SIX (6) QUESTIONS ARE BASED ON THE FOLLOWING INFORMATION: Hours needed to make one unit of: Cars Buses Japan 10 60 Canada 20 40 4. The opportunity cost of one car for Japan is: (1) 3 buses. (2) 2 buses. (3) 1/6 of a bus. (4) 1/2 of a bus. 5. The opportunity cost of one bus for Canada is: (1) 3 cars. (2) 2 cars. (3) 1/6 of a car. (4) 1/2 of a car