13) Economists assume that people are rational in the sense that A) they make a choice based on total, rather than marginal variables. B) they generally make correct choices. C) they use all information available as they take actions to achieve their goals. D) they do not respond to economic incentives. E) both "C" and "D". 14) The principle of comparative advantage was first formulated in the 18th century by A) David Hume. B) Thomas Malthus. C) Karl Marx. D) David Ricardo E) Adam Smith 15) Suppose the world consists of two countries- the U.S. and Canada. Further, suppose there are only two goods - wine and beer. Which of the following statements is true? A) if the U.S. has absolute advantage in the production of wine, then Canada must have an absolute advantage in the production of beer. B) if the U.S. has comparative advantage in the production of wine, then Canada will have a comparative advantage in the production of beer. C) if the U.S. has a comparative advantage in the production of wine, it must also have a comparative advantage in the production of beer. D) if the U.S. has a comparative advantage in the production of wine, Canada might also have a comparative advantage in the production of wine. E) if the opportunity costs are the same for both country, then gains from trade are possible. 16) When opportunity costs are identical between two countries for all goods, A) there will be no gains from trade. B) international trade will be advantageous only to the country that has an absolute advantage in the production of some commodity. C) there will be gains from trade for both countries if one country has an absolute advantage in the production of some commodity. D) absolute advantages will determine the gains from trade. E) there will be absolute advantages from trade but no comparative advantages from trade. 17) If two countries each produce wool and cotton, the country with the lower opportunity cost for cotton (in terms of wool) will also have A) a comparative advantage in the production of wool. B) a comparative advantage in the production of cotton. C) an absolute advantage in the production of wool. D) an absolute advantage in the production of cotton E) an absolute advantage in the production of both wool and cotton.
