1) If Country A is absolutely better at producing everything than Country B, then there is no incentive for Country A to engage in trade with Country B ( True or False?)
2)In one day Sam can produce 40 salads or 32 sandwiches. What is the opportunity cost of producing 1 sandwich?
3)If Tom has a comparative advantage in producing corn then he must also have an absolute advantage in producing corn (T/F?)
5) In one hour John can produce either 3 units of good X or 6 units of good Y. He works an 8 hour day. If he wants to produce 12 units of good Y then how many units of good X can he produce? Enter a whole number.
4)If Joe can produce a good at a lower opportunity cost than Fred, then Joe must have an absolute advantage in producing this good (T/F?)
5) The price of apples in a given week is an example of an economic variable. (T/F)
6)The production possibilities frontier is "bowed out" when resources are specialized. (T/F)
7) In a given amount of time John can produce either 30 pounds of vegetables or 10 pounds of chicken. In the same amount of time George can produce either 25 pounds of vegetables or 5 pounds of chicken. In this simple economy if John and George decide to specialize and exchange with each other then we can expect one pound of chicken to trade for at least ____pounds of vegetables but not more than ___ pounds of vegetables. Enter numerical values in each blank, rounded to two decimal places as necessary.
1) False because according to ricardian theory, both nation can benefit if both country produces according to comparative advantage.
2)opportunity cost of 1 sandwich=40/32=1.25 salad
3)False. It is not necessary for an economy to have absolute advantage for comparative advantage because an economy can also have comparative advantage in a good in which it has minimum absolute disadvantage.
5) 12 unit of Y needs 2 hours. Thus 6hours are used for X and X production will be 6*3=18
4)False. Joe will have comparative advantage.
6) False because All points on PPf shows optimal use of resources.
7)john opp. Cost of chicken=3vegetables
George opp cost of chicken=5vegetables.
Thus john will produce chicken and exchange it with vegetable.
1 chicken should be atleast 3 vegetable but not more than 5pounds of vegetable.
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