question no 13

13. Suppose that a worker in Grassfields can grow either 50 bushels of corn or 45 bushels of oats per year, and a worker in Farmfields can grow either 45 bushels of corn or 50 bushels of oats per year. There are 1,000 workers in Grassfields and 1,000 workers in Farmfields. If the two countries do not trade, half of the workers will produce corn and the other half will produce oats in each country. If the two countries do trade, each will completely specialize in producing the crop for which it has a comparative advantage. If trade occurs, combined output for the two countries will A. decrease by 0 bushels of corn and 5,000 bushels of oats. B. increase by 5,000 bushels of corn and 5,000 bushels of oats. C. increase by 5,000 bushels of corn and 0 bushels of oats. D. increase by 2,500 bushels of corn and 2,500 bushels of oats. E. increase by 0 bushels of corn and 0 bushels of oats. 14. Use Exhibit 2. Which of the following statements is (are) correct? (x) In autarky, the relative price of hats, in terms of caps, in Canada is greater than the relative price of hats in Mexico. (y) Mexico has both an absolute advantage and comparative advantage in the production of hats, and it would be willing to trade with Canada at terms of trade equal to 20 caps for 12 hats. (z) Canada does not have an absolute advantage in either caps or hats but it has a comparative advantage in caps and it would be willing to Exhibit 2 trade with Mexico at terms of trade equal to 20 caps for 12 hats. A. (x), (y) and (z) Output per labor hour B. (x) and (y) only Caps Hats C. (x) and (z) only Canada 8 5 D. (y) and (z) only Mexico g 6 E. (y) only 15. Suppose that a worker in Mahogany can produce either 239 wooden chairs or 127 wooden desks per year, and a worker in Poplar can produce either 284 wooden chairs or 144 wooden desks per year. There are 100 workers in Mahogany and 100 workers in Poplar. Suppose Mahogany and Poplar specialize according to each country's comparative advantage and then engage in trade. Which of the following terms of trade is (are) acceptable to both countries? A. 64 chairs for 35 desks B. 76 chairs for 40 desks C. 88 chairs for 45 desks D. Both A and B, but not C m Both B and C, but not A 16. Suppose that international trade results in an outward shift in a country's production possibilities frontier. This would be described as A. static gains from trade. B. dynamic gains from trade. C. protectionist gains from trade. D. allocation gains from trade. m! Both C and D