Use the following to answer questions 28-29 Figure: The Production Passib lilies

Question

Use the following to answer questions 28-29 Figure: The Production Passib lilies Two Crentri Indonesia Malaysia Quantity of radios 1,600 1,400 1,200 1,000 Quantity 1,600 1,200 1,000 200 200 400 800 1,200 400 800 ,200 Quantity of tires Quantity of tires 28. (Figure: The Production Possibilities for Two Countries) Look at the figure The of producing 1 tire in Production Possibilities for Two Countries. The opportunity cost Indonesia is -radio(s), while the opportunity cost of producing l tire in Malaysia is radio(s) A) 0.5; 2 B) 2;1 C) 600; 800 D) 800; 1,200 29. (Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. The opportunity cost of producing 1 radio in Indonesia is: A) 0.5 tire. B) 1 tire. C) 2 tires. D) 6 tires 30. If a market begins to engage in international trade, we can assume that: A) producers in the exporting industry may be worse off. B) consumers of the imported good may be worse off. C) consumers of the exported good may be better of. D) producers in the importing industry may be worse off Page 7

Explanation / Answer

28.) The correct answer is (A) 0.5,2

The opportunity cost of producing one tire in Indonesia, we see is the slope of the Production Possibility Curve, which is 0.5 radios. Similarily the opportunity cost of producing one tire in Malaysia is 2 radios.

29.) The correct answer is (C) 2 tires

The opportunity cost of producing one radio in Indonesia is 1/(slope of Production Possibility Curve), which is 2 tires

30.) The correct answer is (D) producers in importing industry may be worse off

If a market begins to engage in international trade then we can assume that producers in the importing industry may be worse off, because if we are imporitng a good, then our demand for it from domestic producers will be lower.

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