Question 1

The absolute value of the slope of the production possibility frontier at any point:

Accepted Answer

The absolute value of the slope of the production possibility frontier (PPF) at any point represents the opportunity cost of producing one more unit of the good on the horizontal axis in terms of the quantity of the good on the vertical axis that must be given up. This is a fundamental concept in economics that illustrates the trade-offs in production choices.

Question 2

On a production possibility frontier,opportunity cost is:

Accepted Answer

Opportunity cost refers to the potential cost of giving up one option to pursue another. On a production possibility frontier, it is the decrease in the output of one good when the output of the other good is increased. This means that as more resources are allocated to producing one good, the opportunity cost of producing additional units of that good increases because resources must be taken away from producing the other good.

Question 3

Goods and services purchased from abroad are _____,while goods and services sold abroad are _____.

Accepted Answer

Goods and services purchased from abroad (imports) have occasionally declined but have generally remained positive, while goods and services sold abroad (exports) have shown an increase as a ratio of world production since 2005. Therefore, option D is the correct answer.

Question 4

The term autarky refers to a situation when a country:

Accepted Answer

Autarky refers to a situation where a country does not engage in international trade and is completely self-sufficient. In an autarky, a country produces all its goods and services domestically without relying on imports or exports.

Question 5

The United States must give up the production of 500 bicycles to produce 20 additional tractors.The opportunity cost of producing 5 tractors is _____ bicycles.

Accepted Answer

The opportunity cost of producing 20 tractors is 500 bicycles, so the opportunity cost of producing 1 tractor is 500/20 = 25 bicycles. Therefore, the opportunity cost of producing 5 tractors is 5 * 25 = 125 bicycles.

Question 6

(Table: The Production Possibilities for Cars and Leather Boots)Use Table: The Production Possibilities for Cars and Leather Boots.The opportunity cost of producing one car in Mexico is:

Accepted Answer

The opportunity cost of producing one more of a good is what is given up from producing another good. In this case, if producing one car means producing 500 fewer pairs of leather boots, then the opportunity cost of one car is 500 pairs of leather boots.

Question 7

If the opportunity costs of production are constant,then the production possibility frontier is:

Accepted Answer

A production possibility frontier with constant opportunity costs would be a straight line, since the opportunity cost of producing one good relative to the other remains the same. This is because resources are perfectly interchangeable in the production of the two goods.

Question 8

Britain must give up the production of 75 hats to produce 25 additional sweaters.The opportunity cost of producing 3 hats is _____ sweater(s).

Accepted Answer

The opportunity cost of producing 3 hats is 1 sweater because Britain must give up the production of 75 hats to produce 25 additional sweaters, so for every 3 hats (75/25 = 3), 1 sweater is the opportunity cost.

Question 9

Production possibility frontiers:

Accepted Answer

Production possibility frontiers illustrate the production choices available to an economy.

Question 10

The United States must give up the production of 500 bicycles to produce 20 additional tractors.The opportunity cost of producing 100 bicycles is _____ tractor(s).

Accepted Answer

Since the production of 20 tractors requires giving up the production of 500 bicycles, the opportunity cost of producing 1 tractor is 25 bicycles (500/20=25). Therefore, the opportunity cost of producing 100 bicycles is 4 tractors (100/25=4).

Question 11

In a single year,the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips.In the same growing season,Belgium can raise 50 tons of beef or produce 750 boxes of tulips.In autarky,the opportunity cost of beef:

Accepted Answer

The opportunity cost of producing beef in the Netherlands is 10 boxes of tulips per ton of beef (1,000 boxes of tulips / 100 tons of beef), while in Belgium it is 15 boxes of tulips per ton of beef (750 boxes of tulips / 50 tons of beef). Therefore, the opportunity cost of beef is lower in the Netherlands than in Belgium.

Question 12

In a single year,the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips.In the same growing season,Belgium can raise 50 tons of beef or produce 750 boxes of tulips.In autarky,the opportunity cost of 1 ton of beef in the Netherlands is:

Accepted Answer

The opportunity cost of 1 ton of beef in the Netherlands is the amount of tulips that could have been produced instead. In the Netherlands, 1 ton of beef could have been exchanged for 10 boxes of tulips (since 1,000 boxes/100 tons = 10 boxes/ton). Therefore, the opportunity cost of 1 ton of beef is 10 boxes of tulips. Choice C is the closest option.

Question 13

The _____ model analyzes trade under the assumption that opportunity costs are constant and therefore production possibility frontiers are straight lines.

Accepted Answer

The Ricardian model, also known as the theory of comparative advantage, assumes constant opportunity costs and straight-line production possibility frontiers to analyze trade patterns between two countries based on their relative efficiencies in production. The other models listed do not rely on these assumptions.

Question 14

France and England both produce wine and clothing with constant opportunity costs.France will have a comparative advantage in wine production if:

Accepted Answer

Comparative advantage is based on opportunity cost, not on total production or absolute cost. France will have a comparative advantage in wine production if it has a lower opportunity cost of producing wine than England. In other words, if France has to give up less clothing production in order to produce one unit of wine than England does, then France has a comparative advantage in wine production. This is because France has a relatively lower cost in terms of the foregone output of clothing than England does.

Question 15

In a single year,the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips.In the same growing season,Belgium can raise 50 tons of beef or produce 750 boxes of tulips.From this information,we know that:

Accepted Answer

The concept of comparative advantage suggests that a country should specialize in producing the product in which it has a lower opportunity cost. In this scenario, the opportunity cost of producing 1 ton of beef in the Netherlands is equivalent to producing 10 boxes of tulips (100 tons of beef / 1,000 boxes of tulips), whereas in Belgium, the opportunity cost is equivalent to 15 boxes of tulips (50 tons of beef / 750 boxes of tulips). Therefore, the Netherlands has a lower opportunity cost in producing beef, and Belgium has a lower opportunity cost in producing tulips. Thus, the Netherlands has a comparative advantage in raising beef.

Question 16

In a Ricardian model of international trade,the production possibility frontiers are _____,indicating that the opportunity cost of increasing the production of one item relative to another _____.

Accepted Answer

In a Ricardian model of international trade, the production possibility frontiers are straight lines, indicating that the opportunity cost of increasing the production of one item relative to another is constant. This reflects the assumption of constant returns to scale.

Question 17

As measured by a percentage of the entire economic output:

Accepted Answer

The United States has a relatively large economy, so even though it engages in a substantial amount of foreign trade, the percentage of its economic output that comes from foreign trade is lower than it is for many smaller countries that depend more heavily on trade. For example, according to data from the World Bank, in 2019 the value of all goods and services produced in the United States (GDP) was about $21.4 trillion, and the value of its exports was about $2.5 trillion, or about 11.6% of GDP. In contrast, for Singapore, a much smaller country that relies more heavily on trade, the value of all goods and services produced was about $372.1 billion, and the value of its exports was about $541.4 billion, or about 145.4% of GDP.

Question 18

Britain must give up the production of 75 hats to produce 25 additional sweaters.The opportunity cost of producing 4 sweaters is _____ hats.

Accepted Answer

The opportunity cost of producing 1 sweater is 75 hats / 25 sweaters = 3 hats. Therefore, the opportunity cost of producing 4 sweaters is 4 sweaters * 3 hats/sweater = 12 hats.

Question 19

(Table: The Production Possibilities for Cars and Leather Boots)Use Table: The Production Possibilities for Cars and Leather Boots.Given the opportunity costs of production:

Accepted Answer

The answer of (Table: The Production Possibilities for Cars and...

Question 20

France and England both produce wine and cloth with constant opportunity costs.France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine.England can produce 50 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine.Using this information,we can conclude that:

Accepted Answer

England has a lower opportunity cost of producing cloth, as it can produce 100 bolts of cloth compared to France's 100 bolts only at the cost of giving up on producing 50 barrels of wine. Therefore, England has a comparative advantage in cloth production. France has a comparative advantage in wine production, as it can produce 150 barrels of wine compared to England's 50 barrels only at the cost of giving up on producing 100 bolts of cloth. Since both countries have a comparative advantage in different goods, mutually beneficial international trade is possible.

Quiz 8: International Trade

The absolute value of the slope of the production possibility frontier at any point:

On a production possibility frontier,opportunity cost is:

Goods and services purchased from abroad are _,while goods and services sold abroad are _.

The term autarky refers to a situation when a country:

The United States must give up the production of 500 bicycles to produce 20 additional tractors.The opportunity cost of producing 5 tractors is _____ bicycles.

(Table: The Production Possibilities for Cars and Leather Boots) Use Table: The Production Possibilities for Cars and Leather Boots.The opportunity cost of producing one car in Mexico is:

If the opportunity costs of production are constant,then the production possibility frontier is:

Britain must give up the production of 75 hats to produce 25 additional sweaters.The opportunity cost of producing 3 hats is _____ sweater(s) .