Question 1

Which of the following best describes the concept of comparative advantage?

Accepted Answer

The ability to produce a good or service at a lower opportunity cost than competitors.

Question 2

Suppose the U.S. can produce 6 smartphones or 12 bushels of wheat per hour, and China can produce 4 smartphones or 2 bushels of wheat per hour. What is the opportunity cost for the U.S. to produce 1 bushel of wheat?

Accepted Answer

$$6 \div 12 = 0.5$$ smartphones

Question 3

If a country imposes a tariff on imported goods, who is most likely to be worse off as a result?

Accepted Answer

Domestic consumers

Question 4

Which of the following is NOT a reason why countries do not completely specialize in the production of goods where they have a comparative advantage?

Accepted Answer

All goods are produced with constant returns to scale

Question 5

A firm’s manager rearranges the layout of the factory floor, increasing production without changing the number of inputs. This is an example of:

Accepted Answer

Positive technological change

Question 6

If the total cost (TC) of producing 25 units is $$1,000 and the variable cost (VC) is 700$$, what is the average fixed cost (AFC) per unit?

Accepted Answer

$12

Question 7

Which of the following best explains why the marginal cost (MC) curve is U-shaped?

Accepted Answer

Initially, the marginal product of labor rises, then falls.

Question 8

In the short run, which of the following is true about fixed and variable costs?

Accepted Answer

At least one input is fixed, so there are both fixed and variable costs.

Question 9

Which of the following is a source of comparative advantage for a country?

Accepted Answer

All of the above

Question 10

If the marginal product of labor (MPL) is increasing, what happens to the marginal cost (MC) of production?

Accepted Answer

Marginal cost decreases

Question 11

A quota on imports is most likely to:

Accepted Answer

Make domestic producers better off

Question 12

Which of the following formulas is correct for total fixed cost (TFC)?

Accepted Answer

$$TFC = TC - TVC$$

Question 13

If a country is in autarky, what does this mean?

Accepted Answer

It does not trade with other countries.

Question 14

Which of the following is an example of an explicit cost for a business?

Accepted Answer

The salary paid to employees

Question 15

Suppose Vipsana's Gyros House produces 50 gyros per day. The cost of ingredients is $$2.00 per gyro, she pays two employees 60 $$each per day, and her fixed cost is $120 per day. What is her variable cost per day?

Accepted Answer

$220

Question 16

Which of the following statements about international trade is most accurate?

Accepted Answer

Trade can make a country better off overall, but some individuals may lose.

Question 17

Which of the following best describes the law of diminishing returns?

Accepted Answer

As more variable inputs are added to a fixed input, the marginal product of the variable input eventually decreases.

Question 18

Which of the following is NOT a factor of production?

Accepted Answer

Technology

Question 19

If China has a comparative advantage in producing corn and exports corn to Japan, what can we conclude?

Accepted Answer

China has a lower opportunity cost of producing corn relative to Japan.

Question 20

Which of the following is true about the long-run average cost (LRAC) curve?

Accepted Answer

It shows the lowest cost at which a firm can produce a given quantity of output when all inputs are variable.

Microeconomics Exam 4 Review – International Trade & Production Costs

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