Question

1.Which of the following is a likely explanation for inefficient production combinations?

There are idle resources such as labor and capital not being put to production uses

There is an inefficient allocation of resources with some labor and capital allocated to fish production that would be better suited for bread production

Both A and B are likely explanations

Neither A nor B is a likely explanation

2.Which of the following is a measure of a country’s productive capacity relative to another country?

Absolute advantage

Comparative advantage

Opportunity cost

Gains from trade

3.Which of the following concepts relates the relative cost of producing a good in one country with the relative cost of producing the same good in another country? Absolute advantage

Comparative advantage

Opportunity cost

Gains from trade

4.Opportunity cost is

A measure of what you give up to get something else

Measured as the slope of the production possibilities curve

Reflected in a nation’s absolute advantage in production

All of the above

Only A and B are a reflection of opportunity cost

Answer 1

1.Which of the following is a likely explanation for inefficient production combinations?

Ans. There are idle resources such as labor and capital not being put to production uses

Explanation: For point inside PPF, all resources are not utilised.

2.Which of the following is a measure of a country’s productive capacity relative to another country?

Absolute Advantage
Explanation: Absolute advantage is when one country has higher potential of producing one good than another country.

3.Which of the following concepts relates the relative cost of producing a good in one country with the relative cost of producing the same good in another country? Absolute advantage

Comparative advantage

Explanation: It shows which good has lower opportunity cost in one country relative to another country.

4.Opportunity cost is

Only A and B are a reflection of opportunity cost
Explanation: Opportunity cost is equal to the marginal rate of technical substitution.