US and French Production Opportunities Wine (in millions of gallons) 16 (in mill
ID: 1148837 • Letter: U
Question
US and French Production Opportunities Wine (in millions of gallons) 16 (in millions of lbs US rance 8 Refer to Table 3-32 The opportunity costs for the US and France are as follows O a. In the US 1 million gallons of wine costs 1/2 million pounds of cheese and in France I million gallons of wine costs 2 million pounds of cheese. O b. In the US 1 milion gallons of wine costs 2 million pounds of cheese and in France 1 million gallons of wine costs 1/2 million pounds of cheese. O c In the US 1 milion pounds of cheese cots 1/2 million gallons of wine and in France I million pounds of cheese costs millina glons of wine O d. In the US 1 million pounds galons of wine cos of cheese costs 16 million gallons of wine and in France 1 million pounds of cheese costs 8 million gallons of wine. ssignmentSessionLocator-assignment-tak, b5b15c03-8526-46f4-bofb-1d93795074c5 11:32 AM ^1/28/2018 om/ilm/takeAssignment/takeAssignmentMain.do?takeA re to searchExplanation / Answer
Question 1
Using all its resources, United States can produce either 16 million gallons of wine or 32 million pounds of cheese. Thus, the opportunity cost of producing 1 million gallons of wine is (32/16) 2 million pounds of cheese and the opportunity cost of producing 1 million pounds of cheese is (16/32) 1/2 million gallons of wine.
Using all its resources, France can produce either 8 million gallons of wine or 4 million pounds of cheese. Thus, the opportunity cost of producing 1 million gallons of wine is (4/8) 1/2 million pounds of cheese and the opportunity cost of producing 1 million pounds of cheese is (8/4) 2 million gallons of wine.
Hence, the correct answer is the option (b) and (c).
Question 2
When price is $16 per unit, quantity demanded is 1 unit and quantity supplied is 4 units.
When quantity supplied exceeds quantity demanded, there is surplus.
Calculate the surplus -
Surplus = QS - QD = 4 units - 1 unit = 3 units
There is surplus of 3 units.
Hence, the correct answer is the option (b).
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