Module 4

Use graph 1. For Country A, the opportunity cost of a bushel of wheat is a. 1⁄2 unit of textiles. b. 2⁄3 unit of textiles. c. 11⁄3 units of textiles. d. 11⁄2 units of textiles. e. 2 units of textiles.

a. 1⁄2 unit of textiles because 100/200=0.5

Use graph 1 to determine which country has an absolute advantage in producing each good. Comparative advantage in: WHEAT PRODUCTION/ TEXTILE PRODUCTION a. Country A/ Country B b. Country A/ Country A c. Country B/ Country A d. Country B/Country B e. Country A/Neither country

a. Country A/ Country B

Use graph 1 to determine which country has an absolute advantage in producing each good. Absolute advantage in: WHEAT PRODUCTION/TEXTILE PRODUCTION a. Country A/ Country B b. Country A/ Country A c. Country B/ Country A d. Country B/ Country B e. Country A/ Neither country

a. Country A/ Country B

Graph 1. What is the highest price Country B is willing to pay to buy wheat from Country A? a. 1⁄2 unit of textiles b. 2⁄3 unit of textiles c. 1 unit of textiles d. 11⁄2 units of textiles e. 2 units of textiles

d. 11⁄2 units of textiles

Graph 1. If the two countries specialize and trade, which of the choices below describes the countries' imports? Import: WHEAT/TEXTILES a. Country A/ Country A b. Country A/ Country B c. Country B/ Country B d. Country B/ Country A e. Neither/ Country B

d. Country B/ Country A