Question 1

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 2

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

Accepted Answer

If the opportunity costs of production are constant, it means that the trade-off between producing two different goods remains constant along the production possibility frontier. In other words, to produce more of one good, we must give up a constant amount of the other good. This results in a linear production possibility frontier, which is a straight line. A bowed out or bowed in frontier would indicate that the opportunity costs are not constant, which is not the case according to the question. A circular production possibility frontier is not possible because it would imply that the economy can produce an infinite amount of both goods, which is unrealistic.

Question 3

The term autarky refers to a country that:

Accepted Answer

Autarky refers to a state of economic self-sufficiency where a country does not engage in international trade and relies solely on its own resources to produce and consume goods and services. Therefore, option D, which states that a country does not trade with other countries, is the correct choice.

Question 4

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

To produce 20 additional tractors, the United States must give up the production of 500 bicycles. 
Therefore, each tractor has an opportunity cost of 25 bicycles (500 bicycles / 20 tractors = 25 bicycles per tractor). 
So, the opportunity cost of producing 100 bicycles is 4 tractors (100 bicycles / 25 bicycles per tractor = 4 tractors). Therefore, the best choice is B.

Question 5

Japan must give up the production of 75 computers to produce 25 additional cellular telephones. The opportunity cost of producing 3 computers is _____ cell phone(s).

Accepted Answer

To produce 25 additional cellular telephones, Japan must give up the production of 75 computers, which means the opportunity cost of producing 1 cell phone is 3 computers (75 computers/25 cell phones = 3 computers per cell phone).
Therefore, the opportunity cost of producing 3 computers is 1 cell phone (3 computers/3 computers per cell phone = 1 cell phone). Thus, the best choice is A) 1.

Question 6

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

In autarky, the Netherlands can only choose between producing beef or producing tulips. The opportunity cost of 1 ton of beef is the amount of tulips that could have been produced instead. In the Netherlands, 100 tons of beef can be produced in a year, or 1,000 boxes of tulips. Therefore, the opportunity cost of 1 ton of beef in the Netherlands is 10 boxes of tulips (1,000/100).

Question 7

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 8

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

Accepted Answer

Goods and services purchased from abroad are referred to as imports, while goods and services sold abroad are referred to as exports. Therefore, option B is the correct answer. Option A and C are incorrect as they have mistakenly swapped the terms. Option D is not related to the question.

Question 9

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 10

Production possibility frontiers:

Accepted Answer

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

Question 11

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 answer of The United States must give up the...

Question 12

Over the past 50 years in the United States, as a percentage of gross domestic product:

Accepted Answer

Over the past 50 years in the United States, both exports and imports have grown as a percentage of gross domestic product. This is due to increased globalization and international trade.

Question 13

As measured by a percentage of the entire economic output of the United States, imports have been _____ and exports have been _____.

Accepted Answer

The answer of As measured by a percentage of the...

Question 14

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 15

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 16

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

To determine comparative advantage, we need to calculate the opportunity cost of producing each good in each country. The opportunity cost of raising 1 ton of beef in the Netherlands is 10 boxes of tulips (100 tons beef/1,000 boxes tulips). The opportunity cost of raising 1 ton of beef in Belgium is 15 boxes of tulips (50 tons beef/750 boxes tulips). Since the Netherlands has the lower opportunity cost of producing beef, it has a comparative advantage in raising beef over Belgium.

Question 17

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

Accepted Answer

The Ricardian model assumes that opportunity costs are constant and therefore production possibility frontiers are straight lines, which allows for a simplified analysis of trade.

Question 18

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

Accepted Answer

A country has a comparative advantage in producing a good if its opportunity cost of producing that good is lower than the opportunity cost of the other country. Therefore, if the opportunity cost of wine production is lower in France than in England, France will have a comparative advantage in wine production.

Question 19

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.

Question 20

On a production possibility frontier, opportunity cost is:

Accepted Answer

Opportunity cost is the value of the next best alternative that must be given up to pursue a certain action. In the context of a production possibility frontier, it refers to the amount of one good that must be given up to produce more of another good. Therefore, option A accurately defines the concept of opportunity cost in relation to a production possibility frontier. Option B refers to the concept of exchange rates, option C refers to dollar cost, and option D is not relevant to the concept of opportunity cost.

Quiz 8: International Trade

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