Assurme that Aruba and Iceland can switch between producing coolers and producin

Question

Assurme that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. Table 2 Labor Hours Needed to Make 1 Cooler Radio Aruba 2 7 Iceland 1 7. Refer to Tabie 2. Aruba should export radios and import coolers coolers and import radios. both goods and import neither good. neither good and import both goods. b. C. d. s. "other thinges equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises."Thi demanded relationship between price and quantity a. applies to most goods in the economy. b. is represented by a downward-sloping demand curve is referred to as the law of demand. d. All of the above are correct. 9. Which of the following events must cause equilibrium quantity to rise? a. demand increases and supply decreases b. demand and supply both decrease c. demand decreases and supply increases d. demand and supply both increase 10. In a market economy, who or what determines who produces each good and how much is produced? b. lawyers a. the government

Explanation / Answer

(7) (a)

Let us compute Opportunity cost (OC).

For Aruba,

OC of Cooler = 2/7 = 0.29 Radio

OC of Radio = 7/2 = 3.5 Cooler

For Iceland,

OC of Cooler = 1/4 = 0.25 Radio

OC of Radio = 4/1 = 4 Cooler

Since Aruba can make Radio at a lower OC than Iceland can, Aruba has comparative advantage in and should specialize in and export Radio, and import Coolers.

(8) (d)

The law of demand states that price and quantity demanded of a good are inversely related, so demand curve is downward sloping which applies to most goods.

(9) (d)

Increase in demand shifts demand curve rightward, increasing quantity. Increase in supply shifts supply curve rightward, increasing quantity. So quantity definitely increases.

(10) (c)

In a market economy, production decision is determined by price. The higher (lower) the price, the higher (lower) the quantity produced and supplied.

NOTE: As per Chegg answering guideline, first 4 questions are answered.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.