Name: Nawreen, Johora Siddika Student ID: 2020280421

ASSIGNMENT FROM LECTURE II

Multiple Choice Questions

CHAPTER 3

1. The principle of Absolute Advantage refers to the situation in which one producer:
a. can produce a good in greater quantities than other producers.
b. can produce a good using fewer resources than other producers.
c. is able to produce exactly the same quantity of a good as other producers.
d. has access to more resources than other producers.

2. The principle of Comparative Advantage refers to the situation in which one producer:
a. has a lower opportunity cost than other producers in the production of a good.
b. can produce a good in greater quantities than other producers.
c. has access to more resources than other producers.
d. can produce a good using fewer resources than other producers.

3. Which of the following is true regarding the principle of Absolute Advantage?

a. Nations should specialize in producing those goods for which they have a lower opportunity
cost.
b. Nations should export goods for which they do not have an Absolute Advantage.
c. Nations should specialize in producing those goods for which they have an Absolute
Advantage.
d. Nations should export goods for which they have a higher opportunity cost.

4. Which of the following is true regarding the principle of Comparative Advantage?

a. Nations should specialize in producing those goods for which they use the least amounts of
resources.
b. Nations should specialize in producing those goods for which they have the lowest
opportunity cost.
c. A nation has nothing to gain from trade if it uses fewer resources than other nations to make
any good.
d. A nation has nothing to gain from trade if it uses more resources than other nations to make
any good.

5. The boy next door has offered to mow Tiger Woods' lawn. It will take this boy twice as long as
Tiger Woods to mow the lawn. Would Tiger Woods let the boy mow his lawn, instead of doing it
himself?
a. Yes, as long as the boy's opportunity cost is less than half of Tiger Woods' opportunity cost.
b. Yes, because the boy next door needs the money and Tiger Woods can help him out that way.
c. No, because it will be more efficient if Tiger Woods mows his own lawn, since he can do it
faster.
d. No, because Tiger Woods has better things to do with his money than pay the boy to mow the
lawn.

6. Suppose that engaging in free trade means we have to stop making cars, which will cause
bankruptcies and will make people lose their jobs. Is it still worth having free trade?
a. Yes, because in spite of the lost jobs, we still want to get along with other nations.
b. Yes, because the gains outweigh the losses: new businesses and new jobs will flourish in
other industries.
c. No, because we need to protect our jobs.
d. No, because our wages would have to fall drastically to make us remain competitive with low
wage countries.

7. Suppose that Jill can type 10 pages per hour in the computer, while Jim can only type 8.
Further suppose that Jill can review 5 articles per hour while Jim can only review 2. If they are
working on a final project together, who should specialize in what task in order to be as productive
as possible?
a. Jill should specialize in typing and Jim in reviewing articles.
b. Jill should specialize in reviewing articles and Jim in typing.
c. Jill should perform both tasks, since she is better at both than Jim.
d. Jim should perform both tasks, since he is better at both than Jill.

8. Suppose that Jill can type 10 pages per hour in the computer, while Jim can only type 8.
Further suppose that Jill can review 5 articles per hour while Jim can only review 2. Based on this,
we can say that:
a. Jim has a comparative advantage over Jill in reviewing articles.
b. Jill has an absolute advantage over Jim in reviewing articles.
c. Jim has an absolute advantage over Jill in typing.
d. Jill has a comparative advantage over Jim in typing.

CHAPTER 4

1. Which of the following is NOT a characteristic of a perfectly competitive market?

a. The goods being offered for sale are all the same.
b. Buyers and sellers are very numerous.
c. Buyers and sellers are price takers.
d. It is difficult for new firms to enter the market.
2. A market with only one firm is known as a:
a. complementary market.
b. monopoly.
c. perfectly competitive market.
d. normal market.

3. An increase in demand means that:

a. when the price drops consumers are willing to purchase greater quantities of the good.
b. consumers are willing to purchase greater quantities of the good at any given price.
c. when the price rises, consumers are willing to purchase greater quantities of the good.
d. consumers make the price drop by buying greater quantities of the good.

4. If good B is a substitute for good A, and the price of good B increases:

a. the quantity demanded of good A will decrease.
b. the demand for good A will increase.
c. the price of good A will tend to decrease.
d. the quantity demanded of good B will increase.

5. When the price of a good increases:

a. the quantity supplied of the good will increase.
b. the quantity supplied of the good will decrease.
c. the supply curve of the good will shift to the right.
d. the supply curve of the good will shift to the left.

6. A new technology that helps firms reduce production costs will cause a:
a. movement down and to the left along the supply curve.
b. movement up and to the right along the supply curve.
c. shift to the right of the supply curve.
d. shift to the left of the supply curve.

7. If the price in a market happens to be below equilibrium, there will be a ________ in the
market, and the price will tend to ________.
a. surplus, drop
b. surplus, rise
c. shortage, drop
d. shortage, rise

8. If the price in a market happens to be above equilibrium, there will be a ________ in the
market, and the price will tend to ________.
a. surplus, drop
b. surplus, rise
c. shortage, drop
d. shortage, rise
II. PROBLEMS AND APPLICATIONS

Graph the demand and supply curves of masks in China before and after the outbreak of COVID-
19. Discuss the consequences and implications.

Consequences and Implications:

 For the increase of demand and supply price of mask will remain at equilibrium
 Mask producers and sellers both will be largely profited

 Both the demand and supply rate will keep increasing until a cure of corona virus
arrives in the market
 Prices of resources and labor related to mask production will increase because of the
high demand and supply work.

The market for pizza has the following demand and supply schedules:
Price Quantity Demanded Quantity Supplied
$4 135 pizzas 26 pizzas
5 104 53
6 81 81
7 68 98
8 53 110
9 39 121

a. Graph the demand and supply curves. What is the equilibrium price and quantity in this market?
b. If the actual price in this market were above the equilibrium price, what would drive the market
toward the equilibrium?
c. If the actual price in this market were below the equilibrium price, what would drive the market
toward the equilibrium?

 The equilibrium price is $6 with a quantity of 81

 The market would come back to the equilibrium price if the supply increased and demand
decreased
 The market would go back to equilibrium price if the supply would increase and demand
would decrease