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 Toland, what is the opportunity cost of one unit of timber?
- A. ½ unit of fish
- B. 5 units of fish
- C. ½ unit of timber
- D. 16 units of timber
Correct Answer & Rationale
Correct Answer: A
In Toland, the opportunity cost of one unit of timber is measured in terms of the fish that could have been produced instead. Option A, ½ unit of fish, accurately reflects this trade-off, indicating that producing one additional unit of timber sacrifices half a unit of fish. Option B, 5 units of fish, overestimates the opportunity cost, suggesting an unrealistic trade-off that does not align with the production possibilities. Option C, ½ unit of timber, incorrectly implies that timber production is sacrificed for itself, which is illogical. Lastly, Option D, 16 units of timber, misrepresents the concept of opportunity cost, as it suggests sacrificing timber for more timber, which is not feasible.
In Toland, the opportunity cost of one unit of timber is measured in terms of the fish that could have been produced instead. Option A, ½ unit of fish, accurately reflects this trade-off, indicating that producing one additional unit of timber sacrifices half a unit of fish. Option B, 5 units of fish, overestimates the opportunity cost, suggesting an unrealistic trade-off that does not align with the production possibilities. Option C, ½ unit of timber, incorrectly implies that timber production is sacrificed for itself, which is illogical. Lastly, Option D, 16 units of timber, misrepresents the concept of opportunity cost, as it suggests sacrificing timber for more timber, which is not feasible.
Other Related Questions
Which policy would be most effective to increase Grand Coast's comparative advantage over Toland?
- A. Raise taxes on factories and mills
- B. Encourage more workers to pursue fishing
- C. Maintain spending on infrastructure projects
- D. Improve technology used to produce timber
Correct Answer & Rationale
Correct Answer: B
Encouraging more workers to pursue fishing enhances Grand Coast's comparative advantage by capitalizing on its natural resources and existing industry strengths. This shift allows for specialization, leading to increased efficiency and production in fishing, where Grand Coast may already excel compared to Toland. Raising taxes on factories and mills (A) could deter investment and reduce manufacturing output, weakening economic competitiveness. Maintaining spending on infrastructure projects (C) may improve overall economic conditions but does not directly target enhancing comparative advantage. Improving technology for timber production (D) could be beneficial but may not align with Grand Coast's most advantageous industries compared to fishing.
Encouraging more workers to pursue fishing enhances Grand Coast's comparative advantage by capitalizing on its natural resources and existing industry strengths. This shift allows for specialization, leading to increased efficiency and production in fishing, where Grand Coast may already excel compared to Toland. Raising taxes on factories and mills (A) could deter investment and reduce manufacturing output, weakening economic competitiveness. Maintaining spending on infrastructure projects (C) may improve overall economic conditions but does not directly target enhancing comparative advantage. Improving technology for timber production (D) could be beneficial but may not align with Grand Coast's most advantageous industries compared to fishing.
A drought strikes Toland and decreases the amount of fish caught from 8 units to 2 units. How will this change affect trade negotiations for the following year?
- A. The countries should maintain the existing agreement.
- B. Both countries should produce both goods.
- C. Toland should specialize in the production of timber.
- D. Toland should specialize in the production of fish.
Correct Answer & Rationale
Correct Answer: C
A decrease in fish catch due to drought shifts Toland's production capabilities. Specializing in timber (Option C) allows Toland to focus on a resource that can still be produced effectively, potentially increasing trade value. Maintaining the existing agreement (Option A) ignores the new realities of reduced fish availability, which could lead to imbalances. Producing both goods (Option B) may spread resources too thin, hindering efficiency. Specializing in fish (Option D) is unwise, as the drought has drastically reduced fish availability, making it impractical to rely on this sector.
A decrease in fish catch due to drought shifts Toland's production capabilities. Specializing in timber (Option C) allows Toland to focus on a resource that can still be produced effectively, potentially increasing trade value. Maintaining the existing agreement (Option A) ignores the new realities of reduced fish availability, which could lead to imbalances. Producing both goods (Option B) may spread resources too thin, hindering efficiency. Specializing in fish (Option D) is unwise, as the drought has drastically reduced fish availability, making it impractical to rely on this sector.
Most governmental power under the Articles of Confederation belonged to
- A. the states.
- B. the king.
- C. the president.
- D. the judiciary.
Correct Answer & Rationale
Correct Answer: A
Under the Articles of Confederation, most governmental power resided with the states, reflecting the desire for local governance and autonomy after independence. This decentralization limited the federal government's authority, making option A the most accurate choice. Option B, the king, is incorrect as the Articles were established to break away from monarchical rule. Option C, the president, is misleading since the Articles did not create a strong executive branch; the role of president was largely ceremonial. Option D, the judiciary, is also wrong as the Articles provided minimal judicial power, leaving most authority with state courts.
Under the Articles of Confederation, most governmental power resided with the states, reflecting the desire for local governance and autonomy after independence. This decentralization limited the federal government's authority, making option A the most accurate choice. Option B, the king, is incorrect as the Articles were established to break away from monarchical rule. Option C, the president, is misleading since the Articles did not create a strong executive branch; the role of president was largely ceremonial. Option D, the judiciary, is also wrong as the Articles provided minimal judicial power, leaving most authority with state courts.
What did Taylor believe should be done if an employee was not good at doing an assigned job?
- A. The employee should be fired.
- B. That job's duties should be reorganized.
- C. A job better suited to the employee should be found.
- D. The employee should be made to read Taylor's books and articles.
Correct Answer & Rationale
Correct Answer: C
Taylor advocated for scientific management, emphasizing the importance of matching employees to jobs that fit their skills and abilities. Finding a job better suited to an employee (Option C) aligns with his belief in optimizing workforce efficiency and productivity. Option A, firing the employee, disregards the potential for growth and development. Option B, reorganizing job duties, may not address the root issue of skill mismatches. Option D, making the employee read Taylor's works, lacks practical application and does not directly resolve the employee's performance issues. Thus, aligning roles with individual strengths is key to achieving success.
Taylor advocated for scientific management, emphasizing the importance of matching employees to jobs that fit their skills and abilities. Finding a job better suited to an employee (Option C) aligns with his belief in optimizing workforce efficiency and productivity. Option A, firing the employee, disregards the potential for growth and development. Option B, reorganizing job duties, may not address the root issue of skill mismatches. Option D, making the employee read Taylor's works, lacks practical application and does not directly resolve the employee's performance issues. Thus, aligning roles with individual strengths is key to achieving success.