Activity #6-Microeconomics 1. Motivation for trade includes all of the following

Question

Activity #6-Microeconomics 1. Motivation for trade includes all of the following except To increase output due to specialization. To be able to import goods that are cheaper than those you can make yourself To be able to consume beyond your production possibilities. To reduce your consumption possibilities. a. b. c. d. 2. If a country is completely self-reliant in producing goods for its own consumption needs, then It is consuming more than it could with trade. Its consumption possibilities will equal its production possibilities It is promoting specialization. a. c. d. It has the broadest possible mix of consumer goods. 3. Costa Rica can produce bananas using fewer inputs than Canada; thus a. Costa Rica has an absolute advantage in producing bananas. b. Costa Rica has a comparative advantage in producing bananas. Specialization will not change worldwide consumption possibilities in this case. c. d. All of the answers are correct 4. To say that a country has a comparative advantage in the production of wine is to say that a. It can produce wine with fewer resources than any other country can. b. Its opportunity cost of producing wine is higher than another country's. its opportunity cost of producing wine is lower than another country's. d. The relative price of wine is higher in that country than in any other

Explanation / Answer

(1) (d)

A motive behind trade is to increase the consumption possibilities.

(2) (b)

Complete self-reliance in production means that production possibility and consumption possibility frontier are identical.

(3) (a)

If a country can produce a good using less inputs, it has absolute advantage in that good, and if the country can produce a good at a lower opportunity cost than another country can, it has comparative advantage in that good.

(4) (c)

As explained in Q3.

NOTE: As per Chegg answering guidelines, first 4 questions are answered.

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