MCQ~

1. A nation will gain from trade if it:

A. produces and consumes along its PPF.

B. produces outside its PPF and consumes along its PPF.

C. consumes outside its PPF and produces along its PPF.

D. produces and consumes outside its PPF.

E. produces and consumes inside its PPF.

2. In a two-country, two-product world, the statement "New Zealand has a comparative advantage over Australia in producing milk relative to ships" implies that

A. The ratio of the per unit costs of producing milk over producing ships is lower in Australia than in New Zealand

B. The ratio of the per unit costs of producing milk over producing ships is lower in New Zealand

than in Australia

C. New Zealand has a lower per unit cost than Australia in producing milk and a lower per unit cost in producing ships

D. New Zealand has a higher per unit cost than

Australia in producing milk and a higher per unit

cost in producing ships

E. Australia does not have as a large an endowment of land available for raising cattle as New Zealand

Use the information from the table below to answer Questions 3-4:

Unit Labor Requirements

Australia Fridges: 30 Japan Fridges: 20

Australia Rice: 10 Japan Rice: 10

3. Given the information in the table above,

A. Australia has a comparative advantage in rice; its opportunity cost of rice for fridges is 1/2 of

Japan's opportunity cost.

B. Japan has a comparative advantage in rice; its opportunity cost of rice for fridges is 1/3 of

Australia's opportunity cost.

C. Japan has an absolute advantage in fridges and rice

D. Australia has a comparative advantage in fridges; its opportunity cost of fridges for rice is 3.

E. Japan has a comparative advantage in fridges; its opportunity cost of fridges for rice is 2.

4. Given the information in the table above, if the Australian economy enjoyed technological improvement, and the Unit Labor Requirements halved to 15 for fridges and 5 for rice then Australia should

A. export rice.

B. export fridges.

C. export both and import nothing.

D. export and import nothing.

E. import both and export nothing.