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In: Economics

Question 24 Scenario: Mark can make three tables and one chair in a day, while John...

Question 24

Scenario: Mark can make three tables and one chair in a day, while John can make four tables and one chair in a day.

Refer to the scenario above. Which of the following is true in this case?

Mark should specialize in making chairs, because he has a lower opportunity cost of producing them.

Mark should specialize in making chairs, because he has a greater opportunity cost of producing them.

Mark should specialize in making tables, because he has a greater opportunity cost of producing them.

Mark should specialize in making tables, because he has a lower opportunity cost of producing them.

Question 25

Scenario: Mark can make three tables and one chair in a day, while John can make four tables and one chair in a day.

Refer to the scenario above. Which of the following is true in this case?

John should specialize in making chairs, because he has a greater opportunity cost of producing them.

John should specialize in making chairs, because he has a lower opportunity cost of producing them.

John should specialize in making tables, because he has a greater opportunity cost of producing them.

John should specialize in making tables, because he has a lower opportunity cost of producing them.

Question 26 1

Scenario: Mark can make three tables and one chair in a day, while John can make four tables and one chair in a day.

Refer to the scenario above. Which of the following is true in this case?

John should specialize in making both chairs and tables.

John should specialize in making chairs, and Mark should specialize in making tables.

Mark should specialize in making both chairs and tables.

Mark should specialize in making chairs, and John should specialize in making tables.

Question 27 1 pts

One dollar could be exchanged for 55 rupees in 2013 and for 60 rupees in 2014. This implies that the ________.

nominal exchange rate did not change in 2014

rupee appreciated in 2014

dollar appreciated in 2014

real exchange rate did not change in 2014

Question 28

Assume that at the beginning of 2012, 1 dollar could be traded for 5 yuan. If in 2013, 1 dollar was being traded for 6 yuan, it can be concluded that ________.

the dollar depreciated against the yuan and the yuan appreciated against the dollar in 2013

the real exchange rate changed in 2013, assuming PPP holds

the dollar appreciated against the yuan and the yuan depreciated against the dollar in 2013

the nominal exchange rate did not change in 2013

Solutions

Expert Solution

24. Ans: Mark should specialize in making chairs, because he has a lower opportunity cost of producing them.

25.Ans: John should specialize in making tables, because he has a lower opportunity cost of producing them.

26.Ans: Mark should specialize in making chairs, and John should specialize in making tables.

Explanation:

For Mark;

The opportunity cost of 1 table = 1 / 3 = 0.33 units of chair

The opportunity cost of 1chair = 3 / 1 = 3 tables

For John;

The opportunity cost of 1 table = 1 / 4 = 0.25 units of chair

The opportunity cost of 1chair = 4 / 1 = 4 tables

A country has comparative advantage in the production of a good in which it has lower opportunity cost as compared to other country. A country will specialize in the production of a good in which it has lower opportunity cost as compared to other country.

27.Ans: dollar appreciated in 2014

Explanation:

In the year 2013: 1 dollar = 55 rupees

In the year 2014: 1 dollar = 60 rupees

So dollar is appreciated whereas rupee is depreciated in the year 2014.

28.Ans: the dollar appreciated against the yuan and the yuan depreciated against the dollar in 2013

Explanation:

In the year 2012: 1 dollar = 5 yuan

In the year 2013: 1 dollar = 6 yuan

So dollar is appreciated whereas yuan is depreciated in the year 2013.

Rahul Sunny answered 1 year ago
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