1. In a single day, Crabtown can produce 15 boats or 10 hush puppies. Their potential trading partner, Lobstertown, can produce 15 boats or 5 hush puppies. Who has the comparative advantage in producing what? a. b. Crabtown has comparative advantage in producing hush puppies, and Lobstertown has comparative advantage in producing boats. Crabtown has comparative advantage in producing both goods. and Lobstertown has comparative advantage in producing both goods. Crabtown has comparative advantage in producing boats, and Lobstertown has comparative advantage in producing hush puppies. Neither town has comparative advantage in producing either of the goods. Crabtown has comparative advantage in producing hush puppies but neither town has com narative advantage in n-roducin boats. 2. In a single day, Crabtown Can produce 12 boats or 10 hush puppies. Their potential trading partner, Lobstertown, can produce 15 boats or 5 hush puppies. Which of the following statements is true? * a. Both Crabtown and Lobstertown have absolute advantage in producing boats. b. Neither Crabtown nor Lobstertown have absolute advantage in producing boats. c. Crabtown has absolute advantage in producing boats and Lobstertown has absolute advantage in producing hush puppies. d. Crabtown has absolute advantage in producing hush puppies and Lobstertown has absolute advantage in producing boats. e. Neither has absolute advantage in producing either good. Figure 1.2 Rachel Antih- '51\" D. g 10 E D o 32 4o Bagels Bagels 3. Refer to Figure 1.2. Rachel has absolute advantage in prod ucing_ and Anitha has comparative advantage in producing _. * a. b. c. d. 8. bagels: coffee coffee; bagels both goods: bagels bagels; neither good both goods; neither good Refer to Figure 1.2. Which ofthe following would be an efcient level of production for Rachel? I: 16 cups of coffee and 0 bagels; ll. 13 cups of coffee and 6 bagels; Ill. 12 cups of coffee and 12 bagels * EDP-PF!\" I only ll only Ill only land I| only II and \"I only 5. Refer to Figure 1.2. What is Rachel's opportunity cost of bagels? * a. 1 cup of coffee b. 1/2 cup of coffee c. 2 cups of coffee d. 16 cups of coffee e. 1/4 cup of coffee 6. Refer to Figure 1. 2. Which of the following trading terms would both Anitha and Rachel find acceptable? * a. 1 bagel traded for 1/10 cup of coffee. b. 1 bagel traded for 1/16 cup of coffee. c. 1 bagel traded for 3 cups of coffee. d. 1 bagel traded for 1/3 cup of coffee. e. 1 ba el traded for 1 cu . of coffee 7. Refer to Figure 1. 2. Anitha and Rachel currently split their time equally between producing coffee and bagels. If the trading price is 1 bagel for 5/16 of a cup of coffee which of the following describes the result of specialization and trade? a. Anitha would be unwilling to trade at this price, so there would be no gains from trade. b. Rachel will Specialize in bagels, and Anitha will specialize in coffee. Rachel could sell 5 cups of coffee for 16 bagels produced by Anitha. Rachel will end up with 4 cups of coffee and 16 bagels, and Anitha will end up with 5 cups of coffee and 12 bagels. c. Rachel will specialize in coffee, and Anitha will specialize in bagels. Rachel could sell 5 cups of coffee for 16 bagels produced by Anitha. Rachel will end up with 11 cups of coffee and 16 bagels, and Anitha will end up with 5 cups of coffee and 16 bagels. d. Rachel will specialize in coffee, and Anitha will specialize in bagels. Rachel could sell 5 cups of coffee for 16 bagels produced by Anitha. Rachel will end up with 11 cups of coffee and 16 bagels, and Anitha will end up with 5 cups of coffee and 24 bagels. e. Rachel would be unwilling to trade at this price, so there would be no gains from trade. 8. Refer to Figure 1. 2, Every time Anitha produces a cup of coffee, she gives up making_ bagels. "' a. 4 b. 2 c. 1/4 d. 40 e. 10 9. Refer to Figure 1.2. Suppose Anitha wanted to consume 4 bagels and 10 cups of coffee. Which of the following could allow that to occur? I. Anitha gets better at producing bagels but not coffee. ll. Anitha gets better at producing both goods. lll. Anitha trades with Rachel. * a. I only b. ll only c. III only cl. land Ill only e. II and I\" only 10. Zee can bake 5 pasta bakes or 10 quiches in an hour, and Elmo can bake 3 pasta bakes or IE quiches in an hour. Which of the following statements regarding the possibility for trade between Zoe and Elmo is true? * a. Zoe should specialize in making pasta bakes, and Elmo should specialize in making quiches. They would both be willing to trade at a price of4 quiches for every 1 pasta bake. b. Zoe should specialize in making pasta bakes, and Elmo should specialize In making quiches. They would both be willing to trade at a price of 6 quiches for every 1 pasta bake. c. Zoe should specialize in making quiches, and Elmo should specialize in making pasta bakes. They would both be willing to trade at a price of4 quiches for every 1 pasta bake. d. Zoe should specialize in making quiches, and Elmo should specialize in making pasta bakes. They would both be willing to trade at a price of 6 quiches for every 1 pasta bake. e. They should not specialize and trade, since Elmo has absolute advantage in producing quiches. l 11. Jane can grow 100 bales of cotton or 50 tons of lumber on her land. Clark can grow 120 bales of cotton or I 80 tons of lumber on his land. What terms of trade would both agree to if they specialize and trade? * They trade 1 bale of cotton for 815 of a ton lumber. They tradc 3 bales of cotton for 1 ton of lumber. They trade | bale of cotton for 1,\": ofa can of lumber. They trade lbale of cotton for 5:3 of a ton of lumber. No terms of trade can be agreed on, since Clark has absolute advantage in producing both goods. PPPF