Chapter 1. Basic Principles and Economic Models

1.1

Econ Tutorial
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Questions

6
18

Question

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2
Great job! Country A can produce at maximum EITHER 5 tons of Diapers OR 10 cases of Baby Food. This means that the ratio of Diapers: Baby Food is 10: 5 or 2:1.
Country A can produce at maximum EITHER 5 tons of Diapers OR 10 cases of Baby Food. This means that the ratio of Diapers: Baby Food is 10: 5 or 2:1.

Question

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2
Great job! Country B can produce at maximum EITHER 4 tons of Diapers OR 4 cases of Baby Food. This means that the ratio of Diapers: Baby Food is 4: 4 or 1:1.
Country B can produce at maximum EITHER 4 tons of Diapers OR 4 cases of Baby Food. This means that the ratio of Diapers: Baby Food is 4: 4 or 1:1.

Question

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2
Great job! Country A can produce a ton of diapers at a "cost" of 2 cases of baby food; for Country B the same ton of diapers "costs" only 1 case of baby food. Since Country B has the lower opportunity cost for producing diapers, it possesses the "Comparative Advantage" in diapers. Conversely, the cost for producing baby food is lower in Country A (1/2 ton of diapers) than for Country B (1 ton of diapers) so Country A possesses the "Comparative Advantage" in baby food.
Incorrect. Country A can produce a ton of diapers at a "cost" of 2 cases of baby food; for Country B the same ton of diapers "costs" only 1 case of baby food. Since Country B has the lower opportunity cost for producing diapers, it possesses the "Comparative Advantage" in diapers. Conversely, the cost for producing baby food is lower in Country A (1/2 ton of diapers) than for Country B (1 ton of diapers) so Country A possesses the "Comparative Advantage" in baby food.

Question

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2
Great job! Country A can produce MORE diapers (5) than Country B (4) so Country A has the "Absolute Advantage" in diaper production. Likewise, Country A can produce MORE baby food (10) than Country B (4) so Country A also has the "Absolute Advantage" in baby food production.
Incorrect. Country A can produce MORE diapers (5) than Country B (4) so Country A has the "Absolute Advantage" in diaper production. Likewise, Country A can produce MORE baby food (10) than Country B (4) so Country A also has the "Absolute Advantage" in baby food production.