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In an hour, David can wash 2 cars or mow 1 lawn, while 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?
Ron in washing, neither in mowing
 
Once again, in an hour, David can wash 2 cars or mow 1 lawn, while 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?
Ron in washing, neither in mowing.
 
When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,
they both obtain consumption outside their production possibilities frontier.
 
Which goods will a nation typically import?
those goods in which other nations have a comparative advantage
 
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?
There are no gains from trade in this situation.
 
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, while producing a shirt takes
China will export shirts, while the United States will export aircraft.
 
Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.
True
 
Certain very talented people have a comparative advantage in everything they do.
False
 
If a certain trade is good for one person, it can't be good for the other one.
False
 
If a certain trade is good for one person, it is always good for the other one.
False
 
If trade is good for a country, it must be good for everyone in the country.
False
 
Quantity demanded is a flow variable, which means that it must be expressed
in units of the good per period of time
 
The positive slope of a supply curve indicates that
as price goes up, quantity supplied will increase
 
Suppose that many coal mines are shut for environmental reasons. This will cause
a decrease in the supply of coal (a leftward shift of the supply curve)
 
The market supply curve for wooden shipping crates would shift to the right if
the prices of inputs fall
 
In an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler 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?
Tyler in washing, neither in mowing.
 
Once again, in an hour, Mateo can wash 2 cars or mow 1 lawn, and Tyler 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?
Tyler in washing, Mateo in mowing.
 
When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage,
they both obtain consumption outside their production possibilities frontier.
 
Which goods will a nation typically import?
those goods in which other nations have a comparative advantage China will export shirts, and the United States will export aircraft.
 
Kayla can cook dinner in 30 minutes and wash the laundry in 20 minutes. Her roommate takes half as long to do each task. How should the roommates allocate the work?
There are no gains from trade in this situation.
 
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?
Ron in washing, David in mowing
 
When two individuals produce efficiently and then make a mutually beneficial trade based on comparative advantage, ...
they both obtain consumption outside their production possibilities frontier
 
Which goods will a nation typically import?
those goods in which other nations have a comparative advantage
 
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?
China will export shirts, and the United States will export aircraft
 
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?
there are no gains from trade in this situation
 
In most countries today, many goods and services consumed are imported from abroad, and many goods and services produced are exported to foreign countries
True
 
Interdependence among individuals and interdependence among nations are both based on the gains from trade
True
 
If a person chooses self-sufficiency, then she can only consume what she produces
True
 
A production possibilities frontier is a graph that shows the combination of outputs that an economy should produce
False
 
Production possibilities frontiers cannot be used to illustrate trade-offs
False
 
And economy can produce at any point on or inside its production possibilities frontier, but it cannot produce all points outside its production possibilities frontier
True
 
Opportunity cost refers to how many inputs a producer requires to produce a good
False
 
Opportunity cost measures the trade-off between goods that each producer faces
True
 
If one producer has the absolute advantage in the production of all goods, then that same producer will have a comparative advantage in the production of all goods as well
False
 
If a country has the comparative advantage in producing a product, then that country must also have the absolute advantage in producing that product
False
 
In an economy consisting of two people producing two goods, it is possible for one person to have the absolute advantage and comparative advantage in both goods
False
 
If one producer is able to produce a good at a lower opportunity cost then some other producer, then the producer with a lower opportunity cost is said to have an absolute advantage in the production of that good
False
 
Unless two people who are producing too good to have exactly the same opportunity costs, then one person will have a comparative advantage in one good, and the other person will have a comparative advantage in the other good
True
 
The gains from specialization and trade are based on absolute advantage
False
 
Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage
True
 
Two countries can achieve gains from trade even if one country has an absolute advantage in the production of both goods
True
 
Differences in opportunity cost allow for gains from trade
True
 
Goods produced abroad and sold domestically are called exports and goods produced domestically and sold abroad are called imports
False
 
Trade can make some individuals worse off, even as it makes the country as a whole better off
True
 
Trade allows all countries to achieve greater prosperity
True
 
The time period to which quantity demanded refers when constructing demand curves is
any specified time period
 
The term "quantity demanded" refers to the
total amount of a good that purchasers wish to purchase at a given price during a given period of time
 
A variable that is a "stock"
has meaning only at a point in time
 
Ceteris paribus means
other things being equal
 
The "law of demand" hypothesizes that, other things being equal,
the higher the price, the lower the quantity demanded
 
In a market for a good or service, the quantities demanded and supplied are
both flow variables
 
For a given commodity, quantity demanded can be represented by
a point on a demand curve
 
A demand curve is a representation of the relationship, ceteris paribus,
between quantity demanded and price
 
The "law of demand" describes
an inverse relationship between the price of a good and the quantity of the good demanded per unit of time, other things being equal
 
An important assumption underlying a demand schedule is that
everything else except the product's price is being held constant
 
A demand curve represents graphically
the quantity demanded per unit of time at various prices
 
To say that the demand curve for movies is negatively sloped means that
less quantity will be demanded at higher prices
 
 
A change in demand is said to take place when there is a
shift of the demand curve
 
A normal good is one
for which demand varies directly with household income
 
What is an inferior good?
a good for which demand varies inversely with household income
 
Consider butter and margarine, which are substitutes. When the price of butter falls, the demand curve for margarine is likely to
shift to the left
 
Goods X and Y are defined to be substitutes in consumption if
the demand for Y varies directly with the price of X
 
If the price of tea falls and as a consequence the demand for sugar rises, then tea and sugarare
complementary goods
 
If goods X and Y are substitutes and the price of X falls, all other things being equal, the demand curve for Y will
shift to the left
 
If tastes change so that a particular style of boots is now considered more appealing, the likely result is
a shift in the demand curve to the right
 
Cars and gasoline are likely to be
complementary goods
 
Consider cars and gasoline. Other things being equal, when the price of cars decreases, the demand for gasoline is likely to
increase because the two goods are complements
 
If goods X and Y are complements and the price of X falls, all other things being equal, the demand curve for Y will
shift to the right
 
Ceteris paribus, the position of the demand curve for apples will remain unchanged if there is a change in the
price of apples
 
A variable that is assumed to be constant along an individual's demand curve for good X is the
price of a substitute good, Y
 
"Demand" in a particular market refers to
the entire relationship between quantity demanded and price
 
When deriving the market demand curve for a commodity, the only variable(s) that can change is (are) the quantity of the commodity demanded and
price of the commodity
 
Consider the following two statements. (1) An increase in the price of eggs will cause a decrease in the demand for eggs. (2) An increase in the price of eggs will cause a decrease in the demand for bacon. In which of these two statements is the term "demand" used correctly?
the second statement only
 
Suppose new medical research suggests that consuming 200 grams of tofu everyday helps to prevent heart disease. Widespread knowledge of this research, other things being equal, is likely to have what impact on the market for tofu?
shift the whole demand curve to the right
 
Economists say there has been a change in demand when there is
a shift of the demand curve
 
The term "quantity supplied" is the amount of a commodity that
firms wish to sell at a given price during a given period of time
 
Suppose there is a decrease in the quantity supplied of copper at each price. This change would imply
a shift to the left of the supply curve
 
The term "supply" in a particular market refers to
the entire relationship between quantity supplied and price
 
A fall in the price of raw milk (which is used in the production of ice cream) will                                                                                                                                                                                                                                          increase the supply of ice cream, causing the supply curve of ice cream
to shift to the right
 
To say that the supply curve is positively sloped means that
as price goes up, quantity supplied will increase
 
A rightward shift in the supply curve indicates
an increase in the quantity supplied at each price
 
Suppose that a newer way to produce a good is discovered, which reduces production costs for the good. This will cause
an increase in supply (a rightward shift of the supply curve)
 
Suppose that some resource X is necessary to produce some good Y. If the price of X falls
the supply curve of good Y shifts to the right
 
An improvement in the technology used to produce solar panels will
lead to a rightward shift in the supply curve
 
An increase in the number of firms wanting to provide accounting services will cause a ________ for accounting services.
rightward shift in the supply curve
 
The supply for some good or service will decrease if
the prices of inputs increase
 
A fall in the price of potatoes, which are used in the production of french fries, will lead to an increase in the supply of french fries, causing the supply curve of french fries to
shift to the right
 
A leftward shift in the supply curve indicates
a decrease in the quantity supplied at each price
 
An equilibrium price can be described as
one at which there is neither excess demand nor excess supply
 
"Excess demand" can also be described as
quantity demanded exceeding quantity supplied
 
A surplus exists in the market when
the quantity demanded is less than the quantity supplied
 
At the market-clearing price for a commodity
the quantity supplied of the commodity equals quantity demanded
 
Tickets for music concerts that are sold on the Internet are often sold out within minutes and many unsatisfied customers are unable to get tickets (in the legitimate market). One explanation for this is that
the market price for concert tickets may be set below its equilibrium price
 
The quantity exchanged in the market will be below the equilibrium quantity if
there is either excess supply or demand
 
The term "comparative statics" describes the
comparison of one equilibrium point with another
 
Given a positively sloped supply curve, a rise in the demand for that commodity causes an increase in both the equilibrium price and the equilibrium quantity
exchanged
 
A rise in the quantity demanded of lemons can be attributed to a
rightward shift in the supply curve of lemons
 
Weekend train travel costs less than weekday train travel. If the supply of train service remains the same between weekdays and weekends, then the most likely explanation for this difference in price is that the weekend demand curve
is to the left of the weekday demand curve
 
Suppose that in Montreal in December, 2012, 10 000 ski helmets were sold at a price of $60 each. And in Montreal in December, 2013, 20 000 ski helmets were sold at a price of $80 each.
One possible explanation for the change is that from 2012 to 2013 the ________ curve for ski helmets shifted to the ________.
demand; right
 
Consider a local market for 4-litre containers of windshield-wiper fluid. In January 2012, 100 000 containers were sold at a price of $3 each. In March 2012, 120,000 containers are sold at
a price of $8 each. Does this change in equilibrium price and quantity violate the "law of demand"?
Not necessarily, because the demand curve could have shifted to the right, leading to an increase in equilibrium price and quantity
 
Consider a negatively sloped demand curve for natural gas. If the supply of natural gas increases, the new equilibrium will have
a lower price and a greater quantity
 
With a given upward-sloping supply curve for sirloin steak (a normal good), a rise in household income will cause the
equilibrium price and equilibrium quantity to both increase
 
If the legal beer-drinking age is raised from 18 to 21, the changes to the equilibrium price and quantity of beer are likely to be that
price falls and quantity falls
 
Steel is an important input to the production of cars. Tires and cars are used together by consumers. What will occur in the market for tires when there is an increase in the price of steel?
price falls, quantity falls
 
Aeronautical engineers are a factor of production for airplanes. What will happen in the world market for airplanes when there is a worldwide shortage of aeronautical engineers?
price will increase, quantity exchanged will decrease
 
Assume that apples and oranges are substitute goods. Given the initial supply and demand curves for apples, a reduction in the price of oranges will tend to
decrease the price of apples
 
Suppose that supply for some good increases and that simultaneously the demand for the same good decreases. The result would be
a decrease in price and an indeterminate change in quantity
 
Given a positively sloped supply curve, when market demand increases
the new equilibrium will have a higher price and a larger quantity
 
Suppose we observe that movie theatre prices are less during the daytime than in the evening. If the supply of movies does not change between daytime and evening, then the most likely explanation for this difference in price is
the evening demand curve is to the right of the daytime demand curve
 
If a demand curve and a supply curve can be stated functionally as Qd = 100 - 5P; and Qs = 90 + 5P, respectively, then the equilibrium quantity and price (Q, P) would be
95; 1
 
If a demand curve and a supply curve can be stated functionally as Qd = 500 - 0.1P and Qs = 440 + 0.4P, respectively, then the equilibrium quantity and price (Q, P) would be
488; 120
 
Suppose that the demand and supply curves in the market for apples have the following functional forms: QD = 250 - 4p and QS = 10 + p. The equilibrium quantity and price would then be
Q = 58, p = 48
 
Suppose that the demand and supply curves in the market for apples have the following functional form: QD = 250 - 4p and QS = 10 + p. If the prevailing price on the market is 50, then
the market exhibits an excess supply of 10 units
 
Suppose the demand and supply curves in the market for apples have the following functional form: QD = 250 - 4p and QS = 10 + p. If the prevailing market price is 40, then
the market exhibits an excess demand of 40 units
 
Suppose that the demand and supply curves for green tea are stated functionally as QD = 700 - P and QS = 400 + 2P.
Suppose also that a study is released proving that the regular consumption of green tea prolongs life by at least a decade, and the result is that the quantity demanded of green tea doubles at the initial equilibrium price. The equilibrium price in this case will increase by
200%
 
The price of one good divided by the price of another good is called a
relative price
 
The relative price of a good
reflects its price in terms of units of other goods
 
Suppose that the price of wheat has fallen from $3 to $2 per bushel and that the price of newsprint has fallen from $200 to $100 per tonne. The relative price of
wheat in terms of newsprint
has risen
 
Suppose that the price of good X increases from $3.00 to $4.00 while the price of good Y increases from $150 to $200. The relative price of X (in terms of Y)
remained constant
 
If there is no change in the money price of steel during a period of 6% inflation, then the
relative price of steel has decreased
 
If a change in tastes has raised the price of tomatoes by 5% when the general price level increased by 2%, the price of tomatoes
increased by 3% relative to the average of all prices
 
Suppose an index of average food prices in Canada indicates a decrease in price of 1.7% over a 12-month period. Over the same period, the Consumer Price Index indicates an increase in the general price level of 1.6%. What is the change in food prices relative to the change in the overall price level?
a decrease of 3.3%
 
Suppose an index of average prices of imported goods in Canada indicates an increase in price of 2.3% over a 12-month period. Over the same period the Consumer Price Index indicates an increase in the general price level of 2.3%. What is the change in the price of imports relative to the change in the overall price level?
no change
 
Suppose the world price of oil rises by 25% over a 12-month period; over the same period the average price level in Canada rises by 1.6% What is the change in the price of oil relative to the change in the average price level?
an increase of 23.4%