Economics and Comparative Advantage

Final Exam Practice Questions

Multiple Choice
Identify the choice that best completes the statement or answers the question.

____ 1. Assume that Greece has a comparative advantage in fish and Germany has a comparative advantage in cars. Also assume that Germany has an absolute advantage in both fish and cars. If these two countries specialize and trade so as to maximize the benefits of specialization and trade, then
|a. |the two countries’ combined output of both goods will be higher than it would be in the absence of trade. |
|b. |Greece will produce more fish than it would produce in the absence of trade. |
|c. |Germany will produce more cars than it would produce in the absence of trade. |
|d. |All of the above are correct. |

Table 3-1

Assume that Sardi and Tinaka can switch between producing corn and producing pork at a constant rate.

| |Minutes Needed to Make 1 |
| |Bushel of Corn |Pound of Pork |
|Sardi |20 |12 |
|Tinaka |15 |10 |

____ 2. Refer to Table 3-1. Sardi should specialize in the production of
|a. |corn and Tinaka should specialize in the production of pork. |
|b. |pork and Tinaka should specialize in the production of corn. |
|c. |both goods and Tinaka should specialize in the production of neither good. |
|d. |neither good and Tinaka should specialize in the production of both goods. |

Table 3-2

Assume that Aruba and Iceland can switch between producing