Q: If the opportunity cost of producing 1 airplane in the U.S. is $50$ tons of soybeans and in Canada is $25$ tons of soybeans, what is the range of acceptable prices for 1 airplane in terms of soybeans for mutually beneficial trade?

$25 < ext{price of 1 airplane} < 50$ (tons of soybeans)

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

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

Q: Which of the following best describes absolute advantage?

The ability to produce a good using fewer inputs than another producer.

Q: Which of the following is a direct result of countries specializing according to comparative advantage and trading?

World production and consumption possibilities increase.

Q: Which of the following is a real-world example of how trade can make some individuals worse off, even if it makes a country better off overall?

Workers in industries that compete with imports may lose their jobs due to increased foreign competition.

Question 1

Suppose the U.S. can produce 1 airplane using 500 labor hours or 1 ton of soybeans using 10 labor hours. What is the opportunity cost for the U.S. of producing 1 airplane?

Accepted Answer

$50$ tons of soybeans

Question 2

If Canada can produce 1 airplane using 625 labor hours or 1 ton of soybeans using 25 labor hours, what is the opportunity cost for Canada of producing 1 ton of soybeans?

Accepted Answer

$0.04$ airplanes

Question 3

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

Accepted Answer

A country should specialize in producing the good for which it has the lowest opportunity cost.

Question 4

If the U.S. has an absolute advantage in producing both airplanes and soybeans, why can both the U.S. and Canada still benefit from trade?

Accepted Answer

Because each country has a different opportunity cost, allowing them to specialize according to comparative advantage.

Question 5

Given the following: U.S. opportunity cost of 1 ton of soybeans is $0.02$ airplanes, and Canada’s is $0.04$ airplanes. Which country has a comparative advantage in producing soybeans?

Accepted Answer

The U.S.

Question 6

Suppose the U.S. and Canada agree to trade 22 airplanes for 880 tons of soybeans. What is the price of 1 airplane in terms of soybeans in this trade?

Accepted Answer

$40$ tons of soybeans per airplane

Question 7

If Argentina can produce 1 lb. of coffee using 2 labor hours and 1 bottle of wine using 4 labor hours, while Brazil can produce 1 lb. of coffee using 1 labor hour and 1 bottle of wine using 5 labor hours, which country has an absolute advantage in coffee production?

Accepted Answer

Brazil

Question 8

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

Accepted Answer

They allow people and nations to specialize in activities in which they have a comparative advantage, increasing total production and consumption.

Question 9

If the opportunity cost of producing 1 airplane in the U.S. is $50$ tons of soybeans and in Canada is $25$ tons of soybeans, what is the range of acceptable prices for 1 airplane in terms of soybeans for mutually beneficial trade?

Accepted Answer

$25 < 	ext{price of 1 airplane} < 50$ (tons of soybeans)

Question 10

Suppose Canada specializes in airplanes and the U.S. specializes in soybeans. If Canada produces 48 airplanes using all its labor, how many tons of soybeans can it produce with its remaining labor?

Accepted Answer

$0$ tons of soybeans

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 U.S. uses 35,000 labor hours to produce 3,500 tons of soybeans, how many labor hours does it have left to produce airplanes (given 50,000 total labor hours)?

Accepted Answer

$15,000$ labor hours

Question 13

If the U.S. has $15,000$ labor hours left after producing soybeans, how many airplanes can it produce (given 1 airplane requires 500 labor hours)?

Accepted Answer

$30$ airplanes

Question 14

Which of the following best describes absolute advantage?

Accepted Answer

The ability to produce a good using fewer inputs than another producer.

Question 15

If Brazil’s opportunity cost of producing 1 bottle of wine is $5$ lbs. of coffee, and Argentina’s is $2$ lbs. of coffee, which country has a comparative advantage in wine?

Accepted Answer

Argentina

Question 16

Which of the following is a direct result of countries specializing according to comparative advantage and trading?

Accepted Answer

World production and consumption possibilities increase.

Question 17

Suppose the U.S. produces 30 airplanes and imports 22 airplanes, while exporting 0 airplanes. How many airplanes does the U.S. consume?

Accepted Answer

$52$ airplanes

Question 18

If the U.S. opportunity cost of 1 ton of soybeans is $0.02$ airplanes and Canada’s is $0.04$ airplanes, what is the opportunity cost of 1 airplane in Canada?

Accepted Answer

$25$ tons of soybeans

Question 19

Which of the following is a real-world example of how trade can make some individuals worse off, even if it makes a country better off overall?

Accepted Answer

Workers in industries that compete with imports may lose their jobs due to increased foreign competition.

Chap 3 Ec 201

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