Q: If the opportunity cost of producing 1 kg of potatoes is $$0.5 kg of $$meat for Ruby and $$0.25 kg of $$meat for Frank, what is the range of possible prices (in kg of meat per kg of potatoes) at which trade can occur so both benefit?

$$0.25 \u003c \text{price} \u003c 0.5$$

Question 1

Suppose Frank can produce 8 kg of meat or 32 kg of potatoes in 8 hours, while Ruby can produce 24 kg of meat or 48 kg of potatoes in 8 hours. What is Frank's opportunity cost of producing 1 kg of meat?

Accepted Answer

$$4 kg of $$potatoes

Question 2

Which of the following statements best describes the principle of comparative advantage?

Accepted Answer

It is the ability to produce a good at a lower opportunity cost than another producer.

Question 3

If Ruby's opportunity cost of producing 1 kg of potatoes is $$0.5 kg of $$meat, and Frank's opportunity cost of producing 1 kg of potatoes is $$0.25 kg of $$meat, who has the comparative advantage in producing potatoes?

Accepted Answer

Frank

Question 4

After Frank and Ruby specialize and trade, each consumes at a point:

Accepted Answer

outside their production possibilities frontier

Question 5

Suppose Mateo can wash 2 cars or mow 1 lawn in an hour, and Sophia can wash 3 cars or mow 1 lawn in an hour. Who has the absolute advantage in car washing, and who has the absolute advantage in lawn mowing?

Accepted Answer

Sophia in washing; neither in mowing

Question 6

If the opportunity cost of producing 1 kg of meat for Frank is $$4 kg of $$potatoes, and for Ruby it is $$2 kg of $$potatoes, who should specialize in meat production?

Accepted Answer

Ruby, because she has a lower opportunity cost

Question 7

For both parties to gain from trade, the price at which they trade must:

Accepted Answer

lie between their opportunity costs

Question 8

Which of the following best explains why trade can make everyone better off?

Accepted Answer

Because it allows each person to consume more than they could produce on their own

Question 9

If a nation has a comparative advantage in producing a good, it should:

Accepted Answer

export that good

Question 10

Suppose Kayla can cook dinner in 30 minutes and wash laundry in 20 minutes. Her roommate takes twice as long to do each task. According to the principle of comparative advantage, how should they allocate the work?

Accepted Answer

Kayla should do more of the cooking and her roommate should do more of the washing

Question 11

Which of the following is NOT a necessary condition for two countries to benefit from trade?

Accepted Answer

Each country must have an absolute advantage in at least one good

Question 12

If the opportunity cost of producing 1 kg of potatoes is $$0.5 kg of $$meat for Ruby and $$0.25 kg of $$meat for Frank, what is the range of possible prices (in kg of meat per kg of potatoes) at which trade can occur so both benefit?

Accepted Answer

$$0.25 \u003c 	ext{price} \u003c 0.5$$

Question 13

Which of the following best describes the difference between absolute advantage and comparative advantage?

Accepted Answer

Absolute advantage is based on productivity, while comparative advantage is based on opportunity cost.

Question 14

If a country can produce a good using fewer resources than another country, it is said to have:

Accepted Answer

an absolute advantage

Question 15

Connor McDavid can shovel his sidewalk faster than anyone else, but his opportunity cost is high because he could earn $30,000 in the same time. Kaitlyn, his neighbor, can shovel more slowly but has a much lower opportunity cost. According to the principle of comparative advantage, who should shovel the sidewalk?

Accepted Answer

Kaitlyn, because she has a lower opportunity cost

Question 16

Which of the following is an example of a country applying the principle of comparative advantage?

Accepted Answer

A country imports goods for which it has a higher opportunity cost of production

Question 17

If Frank and Ruby both work 8 hours per day and can use this time to grow potatoes, raise cattle, or both, what does their production possibilities frontier (PPF) represent?

Accepted Answer

The various mixes of output that they can produce given their resources and technology

Question 18

Which of the following statements is true regarding the gains from trade?

Accepted Answer

Gains from trade are based on comparative advantage

Question 19

If a nation has an absolute advantage in producing all goods, what should it do according to the principle of comparative advantage?

Accepted Answer

Specialize in the goods for which it has the lowest opportunity cost and trade for others

Interdependence and the Gains from Trade (Chapter 3): Principles of Macroeconomics

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