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Chapter 3

ECN 104 Chapter Notes - Chapter 3: Ballet Shoe, Absolute Advantage, Kilogram


Department
Economics
Course Code
ECN 104
Professor
Tsogbadral Galaabaatar
Chapter
3

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Chapter 3
1. If there is no trade, which of the following is most likely?
a. A country is better off because it will become self-sufficient.
b. A country's production possibilities frontier is also its consumption possibilities frontier.
c. A country can still benefit from international specialization.
d. More product variety is available in a country.
2. If there is trade, which of the following is most likely?
a. A country is worse off because it becomes dependent on other countries.
b. A country will produce a greater variety of goods and services to trade.
c. A country's consumption possibilities frontier can be outside its production possibilities
frontier.
d. A country will experience a lower unemployment rate.
3. When will a production possibilities frontier be linear and not bowed out?
a. If no tradeoffs exist.
b. If the tradeoff between the two goods is always at a constant rate.
c. If unemployment is zero.
d. If resources are allocated efficiently.
4. Which of the following is NOT correct?
a. Trade allows for specialization.
b. Trade is good for nations.
c. Trade is based on absolute advantage.
d. Trade allows individuals to consume outside of their individual production possibilities
curve.
Table 3-1
Labour Hours Needed to Make
1 Kg of:
Kilograms produced in 40 hours:
Meat Potatoes Meat Potatoes
Farmer 8 2 5 20
Rancher 4 5 10 8
5. Refer to Table 3-1. What is the opportunity cost of 1 pound of meat for the Farmer?
a. 1/4 hour of labour.
b. 4 hours of labour.
c. 4 kg of potatoes.
d. 1/4 kg of potatoes.
6. Refer to Table 3-1. What is the opportunity cost of 1 kg of potatoes for the Rancher?
a. 4 hours of labour.
b. 5 hours of labour.
c. 5/4 kg of meat.
d. 4/5 kg of meat.

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7. Refer to Table 3-1. Which of the following is correct?
a. The Farmer has an absolute advantage in meat, and the Rancher has an absolute advantage
in potatoes.
b. The Farmer has an absolute advantage in potatoes, and the Rancher has an absolute
advantage in meat.
c. The Farmer has an absolute advantage in meat, and the Rancher has an absolute advantage
in meat.
d. The Farmer has an absolute advantage in neither good, and the Rancher has an absolute
advantage in both goods.
Table 3-2
Labour Hours
Needed to Make
1 kilogram of:
Kilograms
Produced in 40
Hours:
Meat Potatoes Meat Potatoes
Farmer 4 1 10 40
Rancher 4 5 10 8
8. Refer to Table 3-2. What is the opportunity cost of 1 kilogram of meat for the Rancher?
a. 4 hours of labour.
b. 5 hours of labour.
c. 5/4 kilograms of potatoes.
d. 4/5 kilogram of potatoes.
9. Refer to Table 3-2. What is the opportunity cost of 1 kilogram of potatoes for the Farmer?
a. 8 hours of labour.
b. 2 hours of labour.
c. 4 kilograms of meat.
d. 1/4 kilogram of meat.
10. Refer to Table 3-2. Which of the following is correct?
a. The Farmer has an absolute advantage in neither good, and the Rancher has a comparative
advantage in meat.
b. The Farmer has an absolute advantage in meat, and the Rancher has a comparative
advantage in potatoes.
c. The Farmer has an absolute advantage in potatoes, and the Rancher has a comparative
advantage in meat.
d. The Farmer has an absolute advantage in neither good, and the Rancher has a comparative
advantage in potatoes.
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