Q: What is the formula for calculating the opportunity cost of producing 1 unit of a good?

$\text{Opportunity Cost} = \frac{\text{Units of other good foregone}}{\text{Units of good produced}}$

Question 1

Which principle of economics explains why nations trade with each other and why trade can make everyone better off?

Accepted Answer

The principle that trade can make everyone better off

Question 2

Suppose Frank and Ruby each spend 8 hours producing meat and potatoes. According to the production table, how many kilograms of potatoes can Frank produce in 8 hours?

Accepted Answer

32 kg

Question 3

If Frank produces only meat, what is the opportunity cost of producing 1 kg of meat for Frank?

Accepted Answer

$4$ kg of potatoes

Question 4

Based on the opportunity cost table, who has the comparative advantage in producing potatoes?

Accepted Answer

Frank, because his opportunity cost of potatoes is lower

Question 5

After Frank and Ruby engage in trade, where do they consume relative to their production possibilities frontier?

Accepted Answer

At a point outside their PPF

Question 6

If Ruby specializes in meat and Frank specializes in potatoes, and they trade, what happens to their total consumption?

Accepted Answer

Both consume more of each good

Question 7

What is the formula for calculating the opportunity cost of producing 1 unit of a good?

Accepted Answer

$	ext{Opportunity Cost} = \frac{	ext{Units of other good foregone}}{	ext{Units of good produced}}$

Question 8

In the context of international trade, a country will typically import goods in which:

Accepted Answer

Other countries have a comparative advantage

Question 9

If Canada can produce 1 car with an opportunity cost of 2 tonnes of food, and Japan can produce 1 car with an opportunity cost of 1 tonne of food, which country has the comparative advantage in cars?

Accepted Answer

Japan

Question 10

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

Accepted Answer

500 computers

Question 11

If Japan uses all its labor to produce computers (30,000 hours, 125 hours per computer), how many computers can it produce?

Accepted Answer

240 computers

Question 12

What is the main reason that trade allows both countries to consume more than they could without trade?

Accepted Answer

Trade allows countries to specialize in goods for which they have a comparative advantage

Question 13

If the price at which two countries trade a good lies between their respective opportunity costs, what is the result?

Accepted Answer

Both countries gain from trade

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 Frank and Ruby trade, and Frank gives Ruby 15 kg of potatoes in exchange for 5 kg of meat, what is the price of trade in terms of potatoes per kg of meat?

Accepted Answer

$3$ kg of potatoes per kg of meat

Question 16

Connor McDavid can shovel his sidewalk faster than anyone else, but should he do it himself? What economic principle applies?

Accepted Answer

Comparative advantage

Question 17

If a country specializes in producing the good for which it has a comparative advantage, what happens to total production in the economy?

Accepted Answer

Total production increases

Question 18

Suppose Kayla can cook dinner in 30 minutes and wash laundry in 20 minutes. Her roommate takes twice as long for each task. How should they allocate the work?

Accepted Answer

Kayla should do more of the cooking based on her comparative advantage

Question 19

Which equation represents the production possibilities frontier (PPF) for Frank, given his maximum outputs of 8 kg meat and 32 kg potatoes?

Accepted Answer

$M = 8 - 0.25P$

Question 20

If Canada exports 700 tonnes of wheat to Japan and imports 110 computers from Japan, what is the price of trade in terms of computers per tonne of wheat?

Accepted Answer

$0.157$ computers per tonne of wheat

Interdependence and the Gains from Trade: Production Possibilities, Comparative Advantage, and Specialization

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