Question

Questions 13-21 test your understanding of the concept of comparative advantage and the circumstances under which people specialize and trade.

In thirty minutes Andy can either pick TWO baskets of grapes or THREE three yards of cloth. In thirty minutes Brenda can either pick ONE basket of grapes or weave ONE yard of cloth. Both Andy and Brenda consume both grapes and cloth.

13. What is Andy’s opportunity cost of picking ONE basket of grapes?

Group of answer choices

C         one-and-a-half yards of cloth

D          two-thirds of a yard of cloth

E          one yard of cloth

A          three yards of cloth

B          two yards of cloth

14. What is Brenda’s opportunity cost of picking ONE basket of grapes?

Group of answer choices

E          one yard of cloth

D          two-thirds of a yard of cloth

B          two yards of cloth

C         one-and-a-half yards of cloth

A          three yards of cloth

Questions 13-21 test your understanding of the concept of comparative advantage and the circumstances under which people specialize and trade.

In thirty minutes Andy can either pick TWO baskets of grapes or THREE three yards of cloth. In thirty minutes Brenda can either pick ONE basket of grapes or weave ONE yard of cloth. Both Andy and Brenda consume both grapes and cloth.

15. Who has a COMPARATIVE advantage in picking grapes?

Group of answer choices

D         both

C          neither

A         Andy

B          Brenda

Questions 13-21 test your understanding of the concept of comparative advantage and the circumstances under which people specialize and trade.

In thirty minutes Andy can either pick TWO baskets of grapes or THREE three yards of cloth. In thirty minutes Brenda can either pick ONE basket of grapes or weave ONE yard of cloth. Both Andy and Brenda consume both grapes and cloth.

16. What is Andy’s opportunity cost of weaving ONE yard of cloth?

Group of answer choices

D          two-thirds of a basket of grapes

B          two baskets of grapes

C         one-and-a-half baskets of grapes

A          three baskets of grapes

E          one basket of grapes

17. What is Brenda’s opportunity cost of weaving ONE yard of cloth?

Group of answer choices

B          two baskets of grapes

D          two-thirds of a basket of grapes

E           one basket of grapes

C         one-and-a-half baskets of grapes

A          three baskets of grapes

18. Who has a COMPARATIVE advantage in weaving cloth?

Group of answer choices

D         both

B          Brenda

C          neither

A         Andy

19. Choose the correct statement below.

Group of answer choices

B          Since Andy is faster than Brenda in picking grapes and weaving cloth, there can never be any scope for specialization and exchange

A         Although Andy is faster than Brenda in picking grapes and weaving cloth, there is scope for specialization and exchange.

20. If Andy spends part of his day weaving cloth for Brenda and Brenda spends part of her day picking grapes for Andy,

Group of answer choices

B          both could never be better off.

A         both might be better off.

21. The theory of comparative advantage implies that each person (country) specializes in the production of the good for which the opportunity cost of production is (BE CAREFUL!)

Group of answer choices

B          low

A         high

Answer 1

Opportunity cost of 1 basket of grapes for Andy=3/2 yards of cloth

Opportunity cost of 1 basket of grapes for Brenda=1/1=1 yards of cloth

Opportunity cost of 1 yard of cloth for Andy=2/3 basket of grapes

Opportunity cost of 1 yard of cloth for Brenda=1/1=1 basket of grapes

What is Andy’s opportunity cost of picking ONE basket of grapes?

Refer to above calculations, correct option is

C one-and-a-half yards of cloth

What is Brenda’s opportunity cost of picking ONE basket of grapes?

Refer to above calculations, correct option is

E one yard of cloth

Who has a COMPARATIVE advantage in picking grapes?

Opportunity cost of picking grapes is lower in case of Brenda, Brenda has a comparative advantage in picking grapes.

So, correct option is

B Brenda

What is Andy’s opportunity cost of weaving ONE yard of cloth?

Refer to above calculations, correct option is

D two-thirds of a basket of grapes

What is Brenda’s opportunity cost of weaving ONE yard of cloth?

Refer to above calculations, correct option is

E one basket of grapes

Who has a COMPARATIVE advantage in weaving cloth?

Opportunity cost of weaving cloth is lower in case of Andy, Andy has a comparative advantage in weaving cloth.

Correct option is

A Andy

Comparative advantage theory suggests that

A . Although Andy is faster than Brenda in picking grapes and weaving cloth, there is scope for specialization and exchange.

If Andy spends part of his day weaving cloth for Brenda and Brenda spends part of her day picking grapes for Andy,

Correct option is

A  both might be better off.

The theory of comparative advantage implies that each person (country) specializes in the production of the good for which the opportunity cost of production is (BE CAREFUL!)

Correct option is

B low