Question

1) Macroeconomics is the study of a.      individual decision makers. b.      economic history. c.      economy-wide phenomena....

1) Macroeconomics is the study of

a.      individual decision makers.

b.      economic history.

c.      economy-wide phenomena.

d.     how firms maximize profit.

2)                                  

Labor hours needed to make one unit of

Amount produced in 40 hours

Cheese

Bread

Cheese

Bread

England

1

2

40

20

Spain

2

8

20

5

England has a comparative advantage in:

a.         bread and Spain has a comparative advantage in cheese.

b.         both goods and Spain has a comparative advantage in neither good.

c.         neither good and Spain has a comparative advantage in both goods.

d.         cheese and Spain has a comparative advantage in bread.

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Answer #1

1. Macroeconomics is the study of economy-wide phenomena. Hence, option(C) is correct.

2.England’s opportunity cost for producing cheese = 20/40 = 0.5 units of bread .

And Spain’s opportunity cost of producing cheese = 5/20 = 0.25 units of bread.

Because Spain has a lower opportunity cost for producing cheese ,so England  has a comparative advantage in the bread  and Spain has a comparative advantage in cheese.

Hence, option(A) is correct.

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