economics chapter 3 test multiple choice – Flashcards
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interdependent
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We rely upon one another for the g/s we all consume
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what happens to a country without trade
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A countries production possibility frontier is the same thing as its consumption possibility frontier
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a countries consumption possibilities frontier can be outside its PPF if what?
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if they trade
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absolute advantage is the driving force of specialization? True or False
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false
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if shawn can produce doughnuts at a lower opportunity cost than Sue, then what should happen?
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Shawn has a comparative advantage in the production of doughnuts
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specialization and trade are closely linked to?
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they are linked because of comparative advantage
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for two individuals who engage in the same two productive activities, it is impossible for one of the two individuals to have what?
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it is impossible for them to have a comparative advantage in both activities
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comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resoucres. T or F
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false
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total output in an economy increases when each perosn specializes because why?
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Because each person spends more time producing the product that they have a comparative advantage in
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the gains from trade are what?
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Are a result of more efficient resource allocation
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the fact that economists are generally united in their support of freetrade is traceable to (two economists)
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Adam smith David Ricardo
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absolute advantage
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the ability to produce a good using fewer inputs
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comparative advantage
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the ability to produce a good with a lower opportunity cost
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adam smiths book
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" the wealth of nations"
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Adam Smith asserted that a person should never attempt to make at home...
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what it will cost him more to make than to buy
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the principle of comparative advantage as we know it today we developed by who?
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David Ricardo
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trade between countries allows them to do/ have what ?
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It allows each country to consume at a point outside of its production possibilities frontier
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a country that currently does not trade with other countries could benefit by doing what?
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trading with other countries
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trade can make everybody better off because it does what?
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It allows people to specialize according to comparative advantage
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the goal of a country concerning international trade is what?
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To maintain a favorable balance of trade
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the "price" of a currenct is determined by what/
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how much someone will pay for it
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the "big mac index" is one method of determining
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purchasing power parity for a nation's currecny.
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the European Union is significant because why?
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-Historically has been a divided continent - it created the largest economy in the word - you have to have high standards of human rights in order to join
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some people see what as a drawback to international trade?
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Homogenization of cultures
