Question 1

Suppose the United States produces both wheat and cars. If the U.S. can produce 10 tons of wheat or 5 cars with the same resources, what is the opportunity cost of producing one car in terms of wheat?

Accepted Answer

$$2$$	ext{ tons of wheat}$

Question 2

Country A can produce $$100$$ units of cloth or $$50$$ units of wine with its resources. Country B can produce $$80$$ units of cloth or $$40$$ units of wine. Which country has the comparative advantage in producing wine?

Accepted Answer

Country B, because it has a lower opportunity cost for wine.

Question 3

If the world price of steel is below the domestic equilibrium price, and the country allows free trade, what will happen to consumer surplus and producer surplus in the domestic market?

Accepted Answer

Consumer surplus increases, producer surplus decreases.

Question 4

A country imposes a quota on imported sugar. Which of the following is a likely effect?

Accepted Answer

Domestic sugar prices rise, benefiting domestic producers.

Question 5

Which of the following best describes 'economies of scale'?

Accepted Answer

Long-run average cost decreases as output increases.

Question 6

A bakery can produce $$100$$ loaves of bread with $$5$$ workers and $$120$$ loaves with $$6$$ workers. What is the marginal product of the sixth worker?

Accepted Answer

$$20$$

Question 7

If a firm’s total cost increases from $$\500$ to $$\$$520$$ when output increases from $$50 to$$ $$52$$ units, what is the marginal cost of producing each additional unit?

Accepted Answer

$$\10$

Question 8

Which of the following is an example of positive technological change?

Accepted Answer

A factory reorganizes its assembly line and produces more cars with the same number of workers.

Question 9

Suppose a firm’s average total cost (ATC) is $$\8$ and its average variable cost (AVC) is $$\$$5$$ when producing $$100$$ units. What is the firm’s average fixed cost (AFC)?

Accepted Answer

$$\3$

Question 10

If the marginal product of labor (MPL) is falling, what is happening to marginal cost (MC)?

Accepted Answer

Marginal cost is rising.

Question 11

A country has a comparative advantage in producing coffee if:

Accepted Answer

It can produce coffee at a lower opportunity cost than other countries.

Question 12

Which of the following is NOT a source of comparative advantage?

Accepted Answer

High tariffs on imports

Question 13

If a firm’s total cost (TC) is $$\1$$,000$$ when producing 200$ units, what is its average total cost (ATC)?

Accepted Answer

$$\5$

Question 14

Which of the following best describes 'autarky'?

Accepted Answer

A country does not trade with other countries.

Question 15

If a country moves from autarky to free trade and imports a good, what happens to the domestic price of that good?

Accepted Answer

The domestic price falls to the world price.

Question 16

A firm’s fixed cost (FC) is $$\300$. If it produces 60$ units, what is its average fixed cost (AFC)?

Accepted Answer

$$\5$

Question 17

Which of the following is a likely reason why countries do NOT fully specialize in the good for which they have comparative advantage?

Accepted Answer

Increasing opportunity costs as specialization increases.

Question 18

If a firm’s average variable cost (AVC) is $$\4$, average fixed cost (AFC) is $$\$$2$$, and it produces $$50$$ units, what is its total cost (TC)?

Accepted Answer

$$\300$

Question 19

Which of the following best describes 'diseconomies of scale'?

Accepted Answer

Long-run average cost increases as output increases.

Question 20

A U.S. company sells airplanes to France. This transaction is:

Accepted Answer

A U.S. export

Comparative Advantage, International Trade, and Production Costs: Study Guide for ECON 201

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