Trade and Opportunity Costs
This passage and table describe the opportunity costs faced by two countries.
1 The countries of Grand Coast and Toland are trading partners. The two main goods
traded are timber and fish. Every year the ministers of trade from each country
attend an international conference to discuss issues related to foreign trade and
decide how each country should specialize. The table provides economic data for
one year.
Which statement best describes a key aspect of the trade relationship between Grand Coast and Toland?
- A. Grand Coast has the advantage in both timber and fish.
- B. Toland has the comparative advantage in fish.
- C. Toland can produce timber at a lower opportunity cost than Grand Coast.
- D. Grand Coast can produce fish at a lower opportunity cost than Toland.
Correct Answer & Rationale
Correct Answer: D
In the context of trade relationships, opportunity cost is crucial. Grand Coast can produce fish at a lower opportunity cost than Toland, meaning it sacrifices less in terms of other goods when producing fish. This advantage allows Grand Coast to specialize in fish production, leading to more efficient trade. Option A is incorrect as it suggests Grand Coast has the advantage in both timber and fish, which is unlikely in a comparative advantage scenario. Option B misstates the comparative advantage, assigning it to Toland for fish, which contradicts the opportunity cost analysis. Option C incorrectly asserts that Toland has a lower opportunity cost for timber, which is not supported by the information provided.
In the context of trade relationships, opportunity cost is crucial. Grand Coast can produce fish at a lower opportunity cost than Toland, meaning it sacrifices less in terms of other goods when producing fish. This advantage allows Grand Coast to specialize in fish production, leading to more efficient trade. Option A is incorrect as it suggests Grand Coast has the advantage in both timber and fish, which is unlikely in a comparative advantage scenario. Option B misstates the comparative advantage, assigning it to Toland for fish, which contradicts the opportunity cost analysis. Option C incorrectly asserts that Toland has a lower opportunity cost for timber, which is not supported by the information provided.
Other Related Questions
Which of these statements best describes the difference between Commonwealth v. Hunt and Muller v. Oregon?
- A. Commonwealth v. Hunt is relevant only to education cases, while Muller v. Oregon is relevant only to issues of labor relations.
- B. Commonwealth v. Hunt is relevant only to labor issues, while Muller v. Oregon is relevant only to free speech issues.
- C. Both cases deal with labor issues; Commonwealth v. Hunt allows the existence of labor unions, while Muller v. Oregon gives businesses the right to challenge unions' demands.
- D. Both cases deal with labor cases; Commonwealth v. Hunt allows the existence of labor unions, while Muller v. Oregon supports state regulation of working hours for women.
Correct Answer & Rationale
Correct Answer: D
Both cases address labor issues but focus on different aspects. Commonwealth v. Hunt established that labor unions are legal and can organize, promoting workers' rights. In contrast, Muller v. Oregon upheld state regulations on women's working hours, emphasizing the government's role in protecting workers' welfare. Option A incorrectly limits Commonwealth v. Hunt to education cases, while B misrepresents both cases by suggesting they only concern labor and free speech issues. Option C inaccurately implies that Muller v. Oregon allows businesses to challenge unions, which is not its focus.
Both cases address labor issues but focus on different aspects. Commonwealth v. Hunt established that labor unions are legal and can organize, promoting workers' rights. In contrast, Muller v. Oregon upheld state regulations on women's working hours, emphasizing the government's role in protecting workers' welfare. Option A incorrectly limits Commonwealth v. Hunt to education cases, while B misrepresents both cases by suggesting they only concern labor and free speech issues. Option C inaccurately implies that Muller v. Oregon allows businesses to challenge unions, which is not its focus.
During the Civil War, which Confederate state had some of its citizens oppose secession and organize their own state, which eventually joined the Union?
- A. Arkansas
- B. Tennessee
- C. Texas
- D. Virginia
Correct Answer & Rationale
Correct Answer: D
During the Civil War, Virginia experienced significant internal conflict over secession. A portion of its citizens opposed joining the Confederacy, leading to the formation of West Virginia. This new state, created in 1863, ultimately joined the Union. In contrast, Arkansas, Tennessee, and Texas remained firmly aligned with the Confederacy throughout the war, with no significant movements to create separate states that joined the Union. Arkansas and Tennessee had divisions in loyalty, but they did not result in the establishment of a new state like West Virginia. Virginia's unique situation highlights the complexities of loyalty during the Civil War.
During the Civil War, Virginia experienced significant internal conflict over secession. A portion of its citizens opposed joining the Confederacy, leading to the formation of West Virginia. This new state, created in 1863, ultimately joined the Union. In contrast, Arkansas, Tennessee, and Texas remained firmly aligned with the Confederacy throughout the war, with no significant movements to create separate states that joined the Union. Arkansas and Tennessee had divisions in loyalty, but they did not result in the establishment of a new state like West Virginia. Virginia's unique situation highlights the complexities of loyalty during the Civil War.
What is this labor market's equilibrium labor quantity?
- A. 2,000 hours per month
- B. 3,000 hours per month
- C. 4,000 hours per month
- D. 5,000 hours per month
Correct Answer & Rationale
Correct Answer: C
In this labor market, the equilibrium labor quantity occurs where the supply of labor equals the demand for labor. Option C, 4,000 hours per month, represents this balance, indicating that employers are willing to hire this amount at the prevailing wage. Option A (2,000 hours) suggests underemployment, where labor supply exceeds demand, leading to inefficiencies. Option B (3,000 hours) may indicate a slight imbalance, as demand has not fully met supply. Option D (5,000 hours) reflects an oversupply of labor, resulting in unemployment, as demand cannot accommodate this quantity. Thus, 4,000 hours is the optimal equilibrium point.
In this labor market, the equilibrium labor quantity occurs where the supply of labor equals the demand for labor. Option C, 4,000 hours per month, represents this balance, indicating that employers are willing to hire this amount at the prevailing wage. Option A (2,000 hours) suggests underemployment, where labor supply exceeds demand, leading to inefficiencies. Option B (3,000 hours) may indicate a slight imbalance, as demand has not fully met supply. Option D (5,000 hours) reflects an oversupply of labor, resulting in unemployment, as demand cannot accommodate this quantity. Thus, 4,000 hours is the optimal equilibrium point.
In Grand Coast, what is the opportunity cost of one unit of fish?
- A. ½ unit of timber
- B. 5 units of timber
- C. 2 units of fish
- D. 8 units of fish
Correct Answer & Rationale
Correct Answer: A
Opportunity cost refers to the value of the next best alternative that is forgone when making a choice. In Grand Coast, if one unit of fish is produced, the opportunity cost is the amount of timber that could have been produced instead. Option A, ½ unit of timber, accurately reflects this trade-off, indicating that for each unit of fish, only half a unit of timber is sacrificed. Option B, 5 units of timber, overestimates the sacrifice, suggesting a much higher cost than what is actually incurred. Option C, 2 units of fish, misinterprets the concept, as it implies a cost in the same product rather than in timber. Option D, 8 units of fish, also incorrectly suggests a loss of the same good, failing to recognize the opportunity cost in terms of timber.
Opportunity cost refers to the value of the next best alternative that is forgone when making a choice. In Grand Coast, if one unit of fish is produced, the opportunity cost is the amount of timber that could have been produced instead. Option A, ½ unit of timber, accurately reflects this trade-off, indicating that for each unit of fish, only half a unit of timber is sacrificed. Option B, 5 units of timber, overestimates the sacrifice, suggesting a much higher cost than what is actually incurred. Option C, 2 units of fish, misinterprets the concept, as it implies a cost in the same product rather than in timber. Option D, 8 units of fish, also incorrectly suggests a loss of the same good, failing to recognize the opportunity cost in terms of timber.