Question

Question 15 A country can produce either 25 pounds of fish or 7 bushels of corn. What is the opportunity cost of producing one bushel of corn? Enter a number rounded to two decimal places.

Question 16 England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 30 scones per hour or 2 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 4 sweaters per hour. Who will produce sweaters? Scotland or England

Question 17 Susan can brew 5 gallons of root beer in an hour or she can make 4 pizzas in an hour. Becky can brew 7 gallons of root beer in an hour or she can make 5 pizzas in an hour. Who has an absolute advantage in making pizza? Susan or Becky

Question 18 Bill and Fred bake cakes and pies. Bill's opportunity cost of baking 1 pie is 3 cakes. Fred's opportunity cost of baking 1 pie is 5 cakes. If both parties are to benefit from trade then we can expect 1 pie to sell for:

A) 4 cakes

B) 2 cakes

C) 6 cakes

Question 23 If trade is beneficial for a country, it must be good for everyone in the country. True or False

Question 25 A country that has an absolute advantage in producing corn does not necessarily have a comparative advantage in producing corn. True or False

Answer 1

15. In the country the two commodity produced are

25 pounds of fish and 7 Bushel of Corn

Thus, 25 pounds of fish = 7 Bushel of Corn

1 Bushel of Corn = 25 / 7

1 Bushel of Corn = 3.57 Bushel of Corn.

16. Given,

	Scones	Sweaters
England	30	2
Scotland	40	4

Now we can calculate the opportunity cost

Opportunity Cost

	England	Scotland
1 Scone	0.066 Sweaters	0.1 Sweaters
1 Sweater	15 Scones	10 Scones

England has comparative advantage in Scones while Scotland has comparative advantage in Sweaters.

Scotland will produce Sweater.

17.

	Beer	Pizza
Susan	5 gallons	4 units
Becky	7 gallons	5 units

From the above table we can see in 1 hour Becky can brew 7 gallons of beer and can bake 5 pizza, which is greater than the Susan. Therefore, Becky has absolute advantage over Susan.

Becky has absolute advantage.

18. Bill

1 pie = 3 cake

Fred

1 pie = 5 cake

They will exchange 1 pie for 2 cakes.

23. True.

25. True.

Refer the example of Becky and Susan

	Beer	Corn
Susan	5	4
Becky	7	5

Becky has absolute advantage in producing beer and corn. Now calculate opportunity cost

Opportunity Cost

	Susan	Becky
1 unit of Beer	0.8 unit of Corn	0.71 unit of Corn
1 unit of Corn	1.25 unit of Beer	1.4 unit of Beer

Thus, Susan has comparative advantage in producing Corn.