#15. Suppose that a worker in Freedonia can produce either 6 units of corn or 2
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Question
#15. Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce ei ther 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initi ated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Sylvania will now be able to consume a maximum of
a.
30 units of corn and 30 units of wheat.
b.
40 units of corn and 30 units of wheat.
c.
40 units of corn and 20 units of wheat.
d.
10 unites of corn and 40 units of wheat.
#16. The gains from trade are
a.
evident in economic models, but seldom observed in the real world.
b.
evident in the real world, but impossible to capture in economic models.
c.
a result of more efficient resource allocation than would be observed in the absence of trade.
d.
based on the principle of absolute advantage.
#17. Suppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in auto parts. Also suppose the US has an absolute advantage in the production of both semiconductors and auto parts. The US should
a.
not trade semiconductors and auto parts with Mexico.
b.
import semiconductors from Mexico and export auto parts to Mexico.
c.
export semiconductors to Mexico and import auto parts from Mexico.
d.
export both semiconductors and auto parts to Mexico.
#18. True or False - It is possible for the U.S. to gain from trade with Germany even if it takes U.S. workers fewer hours to produce every good than it takes German workers.
#19. In a competitive market, the price of a product
a.
is determined by buyers, and the quantity of the product produced is determined by sellers.
b.
is determined by sellers, and the quantity of the product produced is determined by buyers.
c.
and the quantity of the product produced are both determined by sellers.
d.
None of the above is correct.
#20. The term price takers refers to buyers and sellers in
a.
perfectly competitive markets.
b.
monopolistic markets.
c.
markets that are regulated by the government.
d.
markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.
#21. Which of the following is not a determinant of demand?
a.
the price of a resource that is used to produce the good
b.
the price of a complementary good
c.
the price of the good next month
d.
the price of a substitute good
#22. A market supply curve shows how the total quantity supplied of a good varies as
a.
production technology varies.
b.
price varies.
c.
input prices vary.
d.
demand varies.
#23. Which of the following events could cause an increase in the supply of ceiling fans?
a.
The number of sellers of ceiling fans increases.
b.
There is an increase in the price of air conditioners, and consumers regard air conditioners and ceiling fans as substitutes.
c.
There is an increase in the price of the motor that powers ceiling fans.
d.
All of the above are correct.
a.
30 units of corn and 30 units of wheat.
b.
40 units of corn and 30 units of wheat.
c.
40 units of corn and 20 units of wheat.
d.
10 unites of corn and 40 units of wheat.
Explanation / Answer
^Multiple questions. Please post separately.
15.
30 units of corn and 30 units of wheat.
We know that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year. Now, if Freedonia employs all of its labor in production of corn, then it can produce 60 units of corn. However, it trades 30 units of corn in exchange for 30 units of wheats.
Likewise, Sylvania can produce either 2 units of corn or 6 units of wheat per year. By employing 10 units of labor, it can produce 60 units of wheat out of which it sells 30 units to Freedonia in exchange for 30 units of corn.
Notice that when each nation produces a good based on their comparative advantage they increase the overall size of the pie.
30 units of corn and 30 units of wheat.
We know that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year. Now, if Freedonia employs all of its labor in production of corn, then it can produce 60 units of corn. However, it trades 30 units of corn in exchange for 30 units of wheats.
Likewise, Sylvania can produce either 2 units of corn or 6 units of wheat per year. By employing 10 units of labor, it can produce 60 units of wheat out of which it sells 30 units to Freedonia in exchange for 30 units of corn.
Notice that when each nation produces a good based on their comparative advantage they increase the overall size of the pie.
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