Q: Suppose the U.S. can produce either 100 airplanes or 5,000 tons of soybeans per month using 50,000 labor hours. What is the opportunity cost for the U.S. to produce one airplane?

$$50$$ \\text{ tons of soybeans}$

Q: If 22 airplanes are traded for 880 tons of soybeans, what is the price of one airplane in terms of soybeans?

$$40$$ \\text{ tons of soybeans}$

Question 1

Suppose the U.S. can produce either 100 airplanes or 5,000 tons of soybeans per month using 50,000 labor hours. What is the opportunity cost for the U.S. to produce one airplane?

Accepted Answer

$$50$$ \text{ tons of soybeans}$

Question 2

Japan has 30,000 labor hours per month. Producing 1 airplane requires 625 labor hours, and producing 1 ton of soybeans requires 25 labor hours. What is Japan's opportunity cost of producing 1 ton of soybeans?

Accepted Answer

$$0.04$$ \text{ airplanes}$

Question 3

Which country has the absolute advantage in producing airplanes?

Accepted Answer

The U.S., because it requires fewer labor hours to produce one airplane.

Question 4

If the U.S. specializes in soybeans and Japan specializes in airplanes, which principle of trade is being applied?

Accepted Answer

Comparative advantage

Question 5

Suppose the U.S. produces 3,500 tons of soybeans. How many airplanes can it produce with its remaining labor hours?

Accepted Answer

$$30$$ \text{ airplanes}$

Question 6

If 22 airplanes are traded for 880 tons of soybeans, what is the price of one airplane in terms of soybeans?

Accepted Answer

$$40$$ \text{ tons of soybeans}$

Question 7

Which of the following statements best describes comparative advantage?

Accepted Answer

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

Question 8

Argentina requires 2 labor hours to produce 1 lb. of coffee and 4 hours for 1 bottle of wine. Brazil requires 1 hour for 1 lb. of coffee and 5 hours for 1 bottle of wine. Who has the comparative advantage in wine?

Accepted Answer

Argentina, because its opportunity cost of wine is lower.

Question 9

If the opportunity cost of producing 1 airplane in the U.S. is 50 tons of soybeans, and in Japan it is 25 tons of soybeans, which country should specialize in airplanes?

Accepted Answer

Japan, because it has the lower opportunity cost.

Question 10

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

Accepted Answer

Total production in all countries increases.

Question 11

If the U.S. exports soybeans and imports airplanes, what does this imply about its comparative advantage?

Accepted Answer

The U.S. has a comparative advantage in soybeans.

Question 12

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

Accepted Answer

Trade allows people and nations to specialize in activities where they have a comparative advantage.

Question 13

Suppose a candidate argues for tariffs on imported steel, claiming it will make the country better off. Which economic principle challenges this claim?

Accepted Answer

Trade based on comparative advantage increases overall welfare.

Question 14

If Japan uses all its labor hours to produce airplanes, how many airplanes can it produce per month?

Accepted Answer

$$48$$ \text{ airplanes}$

Question 15

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 16

If the opportunity cost of 1 ton of soybeans in the U.S. is $$0.02$$ airplanes, and in Japan it is $$0.04$$ airplanes, which country should specialize in soybeans?

Accepted Answer

The U.S., because it has the lower opportunity cost.

Question 17

Which of the following best describes the concept of opportunity cost?

Accepted Answer

The value of the next best alternative forgone when making a decision.

Question 18

If the price of trade for airplanes is set at 1 airplane for 40 tons of soybeans, which country benefits from this price?

Accepted Answer

Both the U.S. and Japan, because the price is between their opportunity costs.

Interdependence and the Gains from Trade: Absolute and Comparative Advantage

Study Guide - Practice Questions

Study Guide - Flashcards