5. How is absolute advantage found?

a. by comparing opportunity costs

b. by calculating the dollar cost of production

c. by comparing the productivity of one nation to that of another

d. by first determining which country has a comparative advantage

6. A baker can produce only bread, while a butcher can produce only sliced deli meats. If the baker and the butcher like both foods, which of the following is most likely?

a. They cannot gain from trade.

b. They could gain from trade under certain circumstances, but not always.

c. They could gain from trade because each would enjoy a greater variety of food.

d. They could gain from trade only if each were indifferent between bread and sliced deli meats.

7. What does a demand curve illustrate?

a. the negative relationship between number of buyers and quantity demanded

b. the positive relationship between price and quantity demanded

c. the negative relationship between price and quantity demanded

d. the maximum quantity of two goods an economy is capable of producing with available resources and technology

8. Both Canada and the U.S. can produce equally tasty maple syrup. What determines which country will export maple syrup?

a. how the opportunity cost in Canada compares to the opportunity cost in the U.S.

b. how the costs of production in Canada compare to the costs of production in the U.S.

c. how the costs of labour in Canada compare to the costs of labour in the U.S.

d. how the costs of maple syrup in Canada compares to the cost of maple syrup in the U.S.

9. What happens when countries specialize according to their comparative advantage?

a. It is possible to increase world output of all goods.

b. It is possible to increase world output of some goods only by reducing the output of others.

c. One country is likely to gain from trade while others lose.

d. All countries will lose from trade.