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NEW QUESTION: 1

A. Option C
B. Option B
C. Option D
D. Option A
Answer: D

NEW QUESTION: 2

A. Option C
B. Option D
C. Option B
D. Option A
Answer: B

NEW QUESTION: 3

A. Option B
B. Option D
C. Option A
D. Option C
Answer: D

NEW QUESTION: 4
The following table provides the output per labor unit for a pair of countries for two products.
Output/labor unit: Country X: Country Y
Bricks (thousand): 5: 6 Cement (tons): 3.5: 5
Which of the following statements can be supported on the basis of law of comparative advantage?
A. Country X should produce bricks and country Y should produce cement.
B. Country X should produce 0.70 tons of cement for every one thousand bricks, and country Y should produce 0.83 tons of cement for every thousand bricks.
C. Country X should produce cement and country Y should produce bricks.
Answer: A
Explanation:
The law of comparative advantage says that a country should specialize in the production of a good in which it has a relatively lower opportunity cost In the case country X's opportunity cost of producing thousand bricks is 0 70 tons of cement (= 3 5/5) lower opportunity cost. In the case, country X s opportunity cost of producing thousand bricks is 0.70 tons of cement ( 3.5/5). Country Y's cost of producing thousand bricks is 0.83 tons of cement (= 5/6). Given that country X has a lower opportunity cost of producing bricks, it should produce bricks and country Y should produce cement. They will both benefit from trade so long as the terms of trade are between 0.70 - 0.83 tons of cement per thousand bricks.