By Ms.
Tian Julian
AP Micro Section 1 Module 4
1. Differences in production efficiencies among nations in producing a particular good result
from:
A. different endowments of fertile soil.
B. different amounts of skilled labor.
C. different levels of technological knowledge.
D. all of these
2. Countries engaged in international trade specialize in production based on:
A. relative levels of GDP.
B. comparative advantage.
C. relative exchange rates.
D. relative inflation rates
Answer the next question(s) on the basis of the following production possibilities tables for two
countries, Latalia and Trombonia:
3. The above data indicate that production in:
A. both Latalia and Trombonia is subject to constant opportunity costs.
B. Trombonia is subject to decreasing costs, but production in Latalia occurs under increasing
opportunity costs.
C. Latalia is subject to increasing costs, but production in Trombonia occurs under constant
opportunity costs.
D. both Latalia and Trombonia are subject to the law of increasing opportunity costs
4. Refer to the above tables. In Latalia the domestic real cost of 1 ton of pork:
A. is 3 tons of beans.
B. diminishes with the level of pork production.
C. is 5 tons of beans.
D. is 1/5 of a ton of beans.
1
By Ms. Tian Julian
5. Refer to the above tables. If these two nations specialize on the basis of comparative
advantage:
A. Trombonia will produce beans and Latalia will produce pork.
B. Trombonia will produce both beans and pork.
C. Latalia will produce both beans and pork and Trombonia will produce neither.
D. Latalia will produce beans and Trombonia will produce pork
6. Refer to the above tables. Assume that before specialization and trade, Latalia produced
combination C and Trombonia produced combination B. If these two nations now specialize
completely based on comparative advantage, the total gains from specialization and trade will be:
A. 4 tons of beans.
B. 1 ton of pork and 2 tons of beans.
C. 4 tons of pork.
D. 2 tons of pork and 4 tons of beans
7. Refer to the above tables. Which of the following would be feasible terms for trade between
Latalia and Trombonia?
A. 1 ton of beans for 1 ton of pork
B. 2 tons of beans for 1 ton of pork
C. 6 tons of beans for 1 ton of pork
D. 4 tons of beans for 1 ton of pork
8. The terms of trade reflect the:
A. rate at which gold exchanges internationally for any domestic currency.
B. ratio at which nations will exchange two goods.
C. fact that the gains from trade will be equally divided.
D. cost conditions embodied in a single country's production possibilities curve.
2
By Ms. Tian Julian
9. Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines
are trading possibilities curves. The data contained in the production possibilities curves are based
on the assumption of:
A. imperfect substitutability of resources between beer and pizza production.
B. constant costs.
C. decreasing costs.
D. increasing costs
10. Refer to the above diagrams. The solid lines are production possibilities curves; the dashed
lines are trading possibilities curves. The opportunity cost of producing a:
A. pizza is 2 beers in both countries.
B. beer is 1/2 a pizza in both countries.
C. pizza in East Lothian is 1 beer.
D. beer in West Lothian is 1/2 a pizza
11. Refer to the above diagrams. The solid lines are production possibilities curves; the dashed
lines are trading possibilities curves. The data suggest that:
A. West Lothian should specialize in, and export, beer.
B. both countries will be better off if they do not engage in specialization and trade involving
these two products.
C. West Lothian should specialize in, and export, pizza.
D. East Lothian should specialize in, and export, beer.
3
By Ms. Tian Julian
12. Refer to the above diagrams. The solid lines are production possibilities curves; the dashed
lines are trading possibilities curves. The trading possibilities curves imply that:
A. both countries have a trade surplus that will result in economic growth.
B. the domestic production possibilities curves entail unemployment and/or the domestic
misallocation of resources.
C. world resources will be allocated more efficiently if the two nations specialize and trade based
on comparative advantage.
D. both nations will be worse off as a result of international specialization and trade.
13. Refer to the above diagrams. The solid lines are production possibilities curves; the dashed
lines are trading possibilities curves. The trading possibilities curves suggest that the terms of
trade are:
A. 1.5 beers for 1 pizza.
B. 1 beer for 2 pizzas.
C. 2 beers for 1 pizza.
D. 1 beer for 1.5 pizzas
14. The fact that international specialization and trade based on comparative advantage can
increase world output is demonstrated by the reality that:
A. the production possibilities curve of any two nations are identical.
B. a nation's production possibilities and trading possibilities lines coincide.
C. a nation's trading possibilities line lies to the right of its production possibilities line.
D. a nation's production possibilities line lies to the right of its trading possibilities line