The table above shows the amounts of cloth and cheese that China and Pakistan can produce in an hour. Which country has the comparative advantage in cloth and which country has the comparative advantage in cheese?
What will be an ideal response?
In China, to produce 8 cloths has an opportunity cost of 16 cheeses, so the opportunity cost of 1 cloth is (16 cheese)/(8 cloths) = 2 cheeses per cloth. In Pakistan, to produce 4 cloths has an opportunity cost of 12 cheeses. Hence the opportunity cost of 1 cloth is (12 cheeses)/(4 cloths) or 3 cheeses per cloth. Because China's opportunity cost of a cloth is lower, China has the comparative advantage in producing cloth.
In China, to produce 16 cheeses has an opportunity cost of 8 cloths, so the opportunity cost of 1 cheese is (8 cloths)/(16 cheeses) = 1/2 cloth per cheese. In Pakistan, to produce 12 cheeses has an opportunity cost of 4 cloths. Hence the opportunity cost of 1 cheese is (4 cloths)/(12 cheeses) or 1/3 cloth per cheese. Because Pakistan's opportunity cost of a cheese is lower, Pakistan has the comparative advantage in producing cheese.
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A) Why did production and jobs expand slowly in 2011? B) General Motors decides what prices to set for their new models. C) The federal government's decision to spend more on environmental protection D) The effect of floods in agricultural areas on the price and quantity of wheat E) The county government's decision to increase the sales tax for your county
When the demand curve is vertical and the supply curve is upward sloping,:
a. a rise in the input price that increases marginal cost by $1, decreases the firm's profit by $1. b. a drop in the input price that lowers the marginal cost by $1, doubles the firm's profit. c. a drop in the input price that lowers the marginal cost by $1, decreases the output price by $1. d. a rise in the input price that increases the marginal cost by $1, doubles the output price.
The large increase in household wealth in the United States in the 1990s and early 2000s was the result of:
A. large capital gains. B. a low saving rate. C. a high saving rate. D. high rates of inflation.
If prices rise and income stays the same, what is the effect on demand?
(A) More is bought of some goods and less of others. (B) More goods are bought. (C) Demand stays the same. (D) Fewer goods are bought.