Final Homework Comparative advantage and trade.

If Spain can produce 10 tons of olives or 1 ton of olive oil and Italy can produce 5 tons of olives and 5 tons of olive oil, then

• Spain has the absolute advantage in producing olive oil

• Spain has the comparative advantage in producing olives.

• Italy has the absolute advantage in producing olives.

• Italy has the comparative advantage in producing olives.

• All of these.

If Spain can produce 10 tons of olives or 1 ton of olive oil and Italy can produce 5 tons of olives and 5 tons of olive oil, then

• Spain should produce both olives and olive oil.

• Italy should produce both olives and olive oil.

• Spain should specialize in olives and Italy should specialize in olive oil and they should trade.

• Spain should specialize in olive oil and Italy should specialize in olives and they should trade.

• Italy should specialize in olives and Spain should specialize in olive oil and they should trade.

Comparative advantage is determined by what?

• output
• benefit
• opportunity cost
• total cost

What country has an absolute advantage in the production of steel?

• Avagentina

• Gianluccistan

Answer explanation

Ford can produce 200 Mustangs or 400 Escapes in their factory. What is the opportunity cost of making each Mustang?

• 1/2 Escape
• 1/2 Mustang
• 2 Escapes
• 2 Mustangs

Alex and Henry are completing group work for class. It takes Henry and Alex 1 hour to complete the worksheets, while Henry needs 2 and Alex 3 hours to finish the essays (see table).

Assuming Alex and Henry decide to specialize and trade essays and worksheets with one another, what would be a terms of trade or exchange price that would satisfy both of them?

• Any price where an essay costs less than 2 worksheets

• Any price where an essay costs between 2 and 3 worksheets

• Any price where an essay costs more than 3 worksheets

• We cannot determine a mutually agreeable trading price

• Any trading price is possible

Alex and Henry are completing group work for class. It takes Henry and Alex 1 hour to complete the worksheets, while Henry needs 2 and Alex 3 hours to finish the essays (see table).

Who has comparative advantage in producing essays?

• Alex

• Henry

• Neither Henry nor Alex

• Both Henry and Alex

• We cannot determine who has comparative advantage

Which of the following situations would allow agents to gain from specialization and trade with one another?

• The terms of trade are between the two agents' opportunity costs.

• The agents have the same opportunity costs.

• One agent has absolute advantage in both goods.

• One agent has comparative advantage in both goods.

• Either agent has absolute advantage in either of the goods.

Which of the following statements about specialization and trade is true?

• A country should specialize in and export the good for which it has absolute advantage.

• A country should specialize in and import the good for which it has comparative advantage.

• A country should specialize in and import the good for which it has absolute advantage.

• A country should specialize in and export the good for which they have comparative advantage.

• Both countries should specialize and trade in the same good if their opportunity costs are equal