Question

32.  

Japan and China produce guns and rice. The country with the lowest opportunity cost of guns (in terms of rice) will

		A.  import guns.
		B.  have a comparative advantage in guns.
		C.  have an absolute advantage in guns.
		D.  have a comparative advantage in rice.

33.  

If nations begin to specialize in production for the purpose of trade,

		A.  the utility from consumption will increase, but not the total output.
		B.  total world output will increase, as well as well being from consumption.
		C.  total world output will increase, but well being from consumption will not.
		D.  neither total output nor well being from consumption will change.
		E.  the impact on total output and well being cannot be predicted.

Answer 1

32). The country with lowest opportunity cost in producing goods than other nations have the comparative advantage the comparative advantage is measured in terms of opportunity cost. If the country has comparative advantage in the production of the good then they should specialize and export the good.

Ans: b). Have a comparative advantage in guns.

33). If the nation specializes in the production of the guns for the trade, it will increase the total world output , this is because now every one producing more with less inputs of production so the total output will rise.

Ans: b). The total world output will increase, as well as being from consumption.