Q: If Saudi Arabia completely specializes in oil and the United States completely specializes in corn, what is the maximum total output for both countries combined?

$100$ barrels of oil$ \text{ and } 100$ bushels of corn$

Question 1

Which of the following best describes the opportunity cost for Saudi Arabia to produce 1 barrel of oil, based on the production possibilities table provided?

Accepted Answer

$0.25$ bushels of corn$

Question 2

Given the production possibilities, what is the opportunity cost for the United States to produce 1 bushel of corn?

Accepted Answer

$0.5$ barrels of oil$

Question 3

Who has the absolute advantage in oil production?

Accepted Answer

Saudi Arabia

Question 4

Who has the comparative advantage in corn production?

Accepted Answer

United States

Question 5

If Saudi Arabia completely specializes in oil and the United States completely specializes in corn, what is the maximum total output for both countries combined?

Accepted Answer

$100$ barrels of oil$ 	ext{ and } 100$ bushels of corn$

Question 6

What is the slope of the United States’ Production Possibilities Frontier (PPF) if oil is on the vertical axis and corn is on the horizontal axis?

Accepted Answer

$-0.5$

Question 7

If both countries trade based on comparative advantage, which good will Saudi Arabia export?

Accepted Answer

Oil

Question 8

Suppose the world price of oil is set between the opportunity costs of both countries. Which country will import oil?

Accepted Answer

United States

Question 9

If the United States wants to produce 25 barrels of oil and maximize corn production, how many bushels of corn can it produce?

Accepted Answer

$50$ bushels$

Question 10

Which of the following statements is true regarding gains from trade between Saudi Arabia and the United States?

Accepted Answer

Both countries can consume outside their individual PPFs after trade

Question 11

If Saudi Arabia’s opportunity cost of producing 1 bushel of corn is $4$ barrels of oil, what is the opportunity cost of producing 1 barrel of oil?

Accepted Answer

$0.25$ bushels of corn$

Question 12

If the United States reallocates all resources from oil to corn, what is the opportunity cost of producing 1 barrel of oil?

Accepted Answer

$2$ bushels of corn$

Question 13

Which of the following best explains why complete specialization increases total output?

Accepted Answer

It allows each country to produce according to its comparative advantage

Question 14

If Saudi Arabia and the United States each produce at a point inside their PPFs, what does this indicate?

Accepted Answer

Resources are not being used efficiently

Question 15

If the United States can produce 50 barrels of oil or 100 bushels of corn with 100 hours, what is the opportunity cost of producing 1 bushel of corn?

Accepted Answer

$0.5$ barrels of oil$

Comparative and Absolute Advantage, Opportunity Cost, and PPF Analysis

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