Q: If the U.S. produces 3,400 tons of wheat, how many computers can it produce with its remaining labor?

$$\frac{50,000 - (3,400 \times 10)}{100} = 160$$ computers

Question 1

Suppose the U.S. has 50,000 hours of labor available per month. Producing one computer requires 100 hours, and producing one ton of wheat requires 10 hours. What is the maximum number of computers the U.S. can produce if it uses all its labor for computers?

Accepted Answer

$$\frac{50,000}{100} = 500$$ computers

Question 2

Japan has 30,000 hours of labor available per month. Producing one computer requires 125 hours, and producing one ton of wheat requires 25 hours. What is the opportunity cost of producing one computer in Japan?

Accepted Answer

$$\frac{125}{25} = 5$$ tons of wheat

Question 3

If the U.S. uses half its labor to produce computers and half to produce wheat, how many computers and tons of wheat will it produce?

Accepted Answer

250 computers and 2,500 tons of wheat

Question 4

Which country has an absolute advantage in the production of wheat?

Accepted Answer

The U.S., because it requires fewer labor hours per ton of wheat

Question 5

What is the definition of comparative advantage?

Accepted Answer

The ability to produce a good at a lower opportunity cost than another producer

Question 6

If Japan specializes in computers and the U.S. specializes in wheat, what is the main reason both countries can gain from trade?

Accepted Answer

Each country specializes in the good for which it has a comparative advantage

Question 7

Suppose Argentina requires 2 hours to produce a pound of coffee and 4 hours to produce a bottle of wine. Brazil requires 1 hour for coffee and 5 hours for wine. What is Brazil's opportunity cost of producing one bottle of wine?

Accepted Answer

$$\frac{5}{1} = 5$$ pounds of coffee

Question 8

Which statement best describes the concept of opportunity cost?

Accepted Answer

It is the value of the next best alternative forgone when making a decision

Question 9

If the U.S. produces 3,400 tons of wheat, how many computers can it produce with its remaining labor?

Accepted Answer

$$\frac{50,000 - (3,400 	imes 10)}{100} = 160$$ computers

Question 10

If Japan produces 240 computers, how many tons of wheat can it produce with its remaining labor?

Accepted Answer

0 tons of wheat

Question 11

What is the effect of trade on the consumption possibilities of both countries in the example?

Accepted Answer

Trade allows both countries to consume more than they could without trade

Question 12

Which of the following is NOT a requirement for a country to benefit from trade?

Accepted Answer

Having an absolute advantage in at least one good

Question 13

If the opportunity cost of producing one computer in the U.S. is 10 tons of wheat, and in Japan it is 5 tons of wheat, which country has a comparative advantage in computers?

Accepted Answer

Japan

Question 14

Which of the following best describes exports?

Accepted Answer

Goods produced domestically and sold abroad

Question 15

Suppose the U.S. exports 700 tons of wheat to Japan and imports 110 computers from Japan. How many tons of wheat does the U.S. consume?

Accepted Answer

$$3,400 - 700 = 2,700$$ tons of wheat

Question 16

Why is absolute advantage not necessary for comparative advantage?

Accepted Answer

Comparative advantage depends on opportunity cost, not absolute productivity

Question 17

If Argentina's opportunity cost of producing one bottle of wine is 2 pounds of coffee, and Brazil's is 5 pounds of coffee, which country should specialize in wine?

Accepted Answer

Argentina

Question 18

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

Accepted Answer

Gains from trade arise from differences in opportunity costs between countries

Question 19

If the U.S. has an absolute advantage in both computers and wheat, why does Japan still specialize in computers?

Accepted Answer

Japan has a lower opportunity cost for producing computers

Question 20

Which of the following is the correct formula for calculating the opportunity cost of producing one unit of a good?

Accepted Answer

$$	ext{Opportunity Cost} = \frac{	ext{Labor required for good A}}{	ext{Labor required for good B}}$$

The Benefits of Trade: Absolute and Comparative Advantage

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