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.
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.
Other Related Questions
Based on the obituary, what was one result business owners could expect if they put into place Taylor's doctrines?
- A. Loyal employees
- B. Increased outputs
- C. Managers doing more work
- D. Laborers becoming company presidents
Correct Answer & Rationale
Correct Answer: B
Implementing Taylor's doctrines, which emphasize scientific management and efficiency, would likely lead to increased outputs. These principles focus on optimizing work processes and enhancing productivity, resulting in higher production levels. Option A, loyal employees, is not a direct outcome of Taylorism; while efficiency may improve morale, loyalty is not guaranteed. Option C, managers doing more work, contradicts Taylor's aim of defining roles clearly to enhance efficiency. Option D, laborers becoming company presidents, is unrealistic within the framework of Taylor's doctrines, which prioritize specialization rather than promoting laborers to managerial positions.
Implementing Taylor's doctrines, which emphasize scientific management and efficiency, would likely lead to increased outputs. These principles focus on optimizing work processes and enhancing productivity, resulting in higher production levels. Option A, loyal employees, is not a direct outcome of Taylorism; while efficiency may improve morale, loyalty is not guaranteed. Option C, managers doing more work, contradicts Taylor's aim of defining roles clearly to enhance efficiency. Option D, laborers becoming company presidents, is unrealistic within the framework of Taylor's doctrines, which prioritize specialization rather than promoting laborers to managerial positions.
What is this labor market's equilibrium wage rate?
- A. $4 per hour
- B. $8 per hour
- C. $12 per hour
- D. $16 per hour
Correct Answer & Rationale
Correct Answer: C
In a labor market, the equilibrium wage rate occurs where the quantity of labor supplied equals the quantity of labor demanded. Option C, $12 per hour, represents this balance, reflecting conditions where employers are willing to hire the same number of workers that job seekers are willing to accept. Option A, $4 per hour, is too low, leading to a surplus of labor as more workers seek jobs than employers are willing to hire. Option B, $8 per hour, may still create an imbalance, as it might not attract enough skilled workers. Option D, $16 per hour, is likely too high, resulting in a labor shortage as fewer employers can afford to pay that rate. Thus, $12 per hour is the optimal equilibrium wage.
In a labor market, the equilibrium wage rate occurs where the quantity of labor supplied equals the quantity of labor demanded. Option C, $12 per hour, represents this balance, reflecting conditions where employers are willing to hire the same number of workers that job seekers are willing to accept. Option A, $4 per hour, is too low, leading to a surplus of labor as more workers seek jobs than employers are willing to hire. Option B, $8 per hour, may still create an imbalance, as it might not attract enough skilled workers. Option D, $16 per hour, is likely too high, resulting in a labor shortage as fewer employers can afford to pay that rate. Thus, $12 per hour is the optimal equilibrium wage.
As used in the highlighted text, 'continental United States' means the area comprising the nation's
- A. entire territory.
- B. Western region.
- C. first 48 states.
- D. 50 states.
Correct Answer & Rationale
Correct Answer: C
The term 'continental United States' specifically refers to the contiguous landmass of the nation, which includes the first 48 states, excluding Alaska and Hawaii. Option A is incorrect as it suggests the entire territory, including non-contiguous states and territories. Option B is wrong because it only addresses a specific region, neglecting the rest of the country. Option D is misleading since it includes Alaska and Hawaii, which are not part of the continental landmass. Thus, the phrase accurately describes the first 48 states, making it the most precise choice.
The term 'continental United States' specifically refers to the contiguous landmass of the nation, which includes the first 48 states, excluding Alaska and Hawaii. Option A is incorrect as it suggests the entire territory, including non-contiguous states and territories. Option B is wrong because it only addresses a specific region, neglecting the rest of the country. Option D is misleading since it includes Alaska and Hawaii, which are not part of the continental landmass. Thus, the phrase accurately describes the first 48 states, making it the most precise choice.
According to Cartoon 2, how were American laborers affected by foreign laborers?
- A. A larger supply of labor tends to drive down wages.
- B. A growing population tends to raise the cost of living.
- C. A growing demand for jobs tends to increase productivity.
- D. A larger labor market tends to provide better job opportunities.
Correct Answer & Rationale
Correct Answer: A
American laborers faced wage reductions due to the influx of foreign laborers, as indicated in Cartoon 2. A larger supply of labor typically leads to increased competition for jobs, resulting in lower wages for workers. Option B incorrectly suggests that a growing population raises living costs; while this can be true, it does not directly address the impact of foreign labor on American workers' wages. Option C focuses on job demand increasing productivity, which is unrelated to the effects of foreign labor on wages. Option D claims a larger labor market provides better job opportunities, but this overlooks the wage suppression effect highlighted in the cartoon.
American laborers faced wage reductions due to the influx of foreign laborers, as indicated in Cartoon 2. A larger supply of labor typically leads to increased competition for jobs, resulting in lower wages for workers. Option B incorrectly suggests that a growing population raises living costs; while this can be true, it does not directly address the impact of foreign labor on American workers' wages. Option C focuses on job demand increasing productivity, which is unrelated to the effects of foreign labor on wages. Option D claims a larger labor market provides better job opportunities, but this overlooks the wage suppression effect highlighted in the cartoon.