Suppose Italy has the comparative advantage in producing wine and Germany has the comparative advantage in producing machine tools. Suppose further that each country produces both goods when operating in autarky. When the countries move from autarky to mutually beneficial trade, profits in the German machine tool industry will everything else held constant. Select one: O A. decrease O B. be ambiguous O C. remain unchanged O D. increase

Suppose Italy has the comparative advantage in producing wine and Germany has the comparative advantage in producing machine tools. Suppose further that each country produces both goods when operating in autarky. When the countries move from autarky to mutually beneficial trade, profits in the German machine tool industry will everything else held constant. Select one: O A. decrease O B. be ambiguous O C. remain unchanged O D. increase

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 9 wine 90 80 70 60 50 40 30 20 10 0 0 10 England d) 2 bottles of wine/yard O e) 3 bottles of wine/yard PPF 20 30 40 50 09. What is the relative price (opportunity cost of one yard) of cloth in Portugal? O a) 1/3 bottles of wine/yard O b) 1/2 bottle of wine/yard O c) 4 man-hours/yard 60 cloth wine 90 80 70 60 50 40 30 20 10 0 0 10 Portugal PPF 20 30 40 50 60 cloth
Ot
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If Switzerland can produce chocolate at a lower relative cost than Belgium, what kind of advantage does Switzerland have? O a comparative advantage O an absolute advantage a resource advantage a production advantage
According to David Ricardo, O A. If countries specialize where they have an absolute advantage and trade, their efficiency and standard of living can improve O B. Countries should strive to develop their absolute advantage to benefit from trade with other countries O C. If countries specialize where they have a comparative advantage and trade, all groups in their economies will benefit equaly OD. If countries specialize where they have a comparative advantage and trade, their efficiency and standard of living can improve
QUESTION 13 wine 90 8888888 80 70 60 50 40 30 20 PPF Portugal 1 CPF 10. 0 0 10 20 30 40 50 60 cloth wine 90 80 70 60 50 40 30 20 10 England 1 PPF CPF 0 0 10 20 30 40 50 60 cloth 13. According to the above set of production possibilities and consumption (trade) possibilities frontiers, what will happen to production and relative prices once trade is opened between these two countries? O a) Production of cloth in Portugal will fall to zero, while the price of wine will fall to ½ yd/bottle. b) Production of cloth in England will fall to zero, while the price of wine will increase to ½ yd/bottle. c) Production of wine in Portugal will increase to 90, while the price of cloth will fall to 2 yd/bottle. d) Production of wine in England will increase to 60, while the price of cloth will fall to 3 bottles/yd.
2. Suppose that two countries can produce wheat or cotton. If country A produces only wheat it can produce 55 units of wheat, and if it produces only cotton it can produce 35 units of cotton. If country B produces only wheat it can produce 65 units of wheat, and if it produces only cotton it can produce 45 units of cotton. Given the production possibilities curves above, which of the following would be feasible terms of trade between country A and country B? a. one unit of wheat for 0.75 unit of cotton. b. one unit of cotton for 1.5 units of wheat. c. one unit of wheat for 0.55 unit of cotton. d. one unit of cotton for 1.67 units of wheat. e. all of the above are feasible terms of trade. f. none of the above are feasible terms of trade.
llery Two countries namely the United States and the United Kingdom can produce both wheat and whiskey. Their production possibility frontiers are shown below. Based on this one can say that Wheat (millions of bushels) United States 1500 1000 Whiskey (millions of bottles) Wheat (millions of bushels) 100 United Kingdom 500 Whiskey (millions of bottles) nt ire O Both countries would gain if the United States produced both wheat and whiskey, and United Kingdom produced only whiskey and they traded. O Both countries will get the most desired outcome if each produced both wheat and whiskey, and they traded in both wheat and whiskey. O Both countries would gain if United States produced only whiskey and United Kingdom produced both wheat and whiskey and they traded. O Both countries would gain if the United States specialized in producing wheat, and United Kingdom produced only whiskey and they traded. O United States has an absolute advantage in producing both wheat and whiskey, and thus…