ing questions according to the data below Country A Golf Balls Rubber Bands 80 2
ID: 1166662 • Letter: I
Question
ing questions according to the data below Country A Golf Balls Rubber Bands 80 20 30 10 20 40 Country B Golf Balls Rubber Bands 32 24 16 10 Country A has an absolute advantage in_and a comparative advantage in the production of a. golf balls and rubber bands; golf balls b, rubber bands, golf balls c. rubber bands and golf balls; rubber bands d. none of the above The most likely terms of trade would be a. one rubber band for 5 golf balls b. one rubber band for one golf ball c. one golf ball for 3 rubber bands d. one rubber band for 3 golf balls 2. Answer the following 2 questions according to the table below: NUMBER | TOTAL UTILITY | NUMBER OF I TOTAL UTILITY OF PLANTS 120 200 260 300 320 OF PRINTS 20 36 48 56 60 PRINTS OF PLANTS 2 3 4 2 5 Suppose the price of plants is $20 and the price of prints is $4. The marginal utility per dollar (MU/P) spent on the second plant is a. 0.50 b. 0.80 3. 4 d. 20Explanation / Answer
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1.
Country A has an absolute advantage in both goods as its production possibility frontier would be greater than country B whereas country A has a comparative advantage in golf balls as the opportunity cost of producing golf balls in terms of rubber bands is 80/40=2 which is lower than the opportunity cost of golf balls for country B .i.e. 40/10=4
the correct option is A
2.
The most likely terms of trade would be one golf ball for 3 rubber balls as the opportunity cost is 2 and 4 for countries A and B respectively so terms of trade would be between these values.
the correct option is C
3.
marginal utility per dollar at the second plant will be MU/P. MU is marginal utility at the second plant which is measured by the difference in total utility in second compared to the first plant .i.e.200-120 = 80 and price is $20 so MU/P= 80/20 is 4
the correct option is C
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