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
When is a government most likely to establish a wage floor?
- A. When wages have consistently increased over a long period of time
- B. When wages have remained constant over a long period of time
- C. When it determines wages are too low
- D. When it determines wages are too high
Correct Answer & Rationale
Correct Answer: C
A wage floor, often implemented through minimum wage laws, is typically established when the government identifies that wages are too low, leading to insufficient income for workers. Option A is incorrect because a consistent increase in wages does not necessitate a wage floor; it may indicate a healthy economy. Option B is also wrong, as constant wages may not reflect a need for intervention unless they are deemed inadequate. Option D misinterprets the purpose of a wage floor; it is not set when wages are high, but rather to protect workers from unlivable pay levels. Thus, the rationale for a wage floor centers on addressing low wages.
A wage floor, often implemented through minimum wage laws, is typically established when the government identifies that wages are too low, leading to insufficient income for workers. Option A is incorrect because a consistent increase in wages does not necessitate a wage floor; it may indicate a healthy economy. Option B is also wrong, as constant wages may not reflect a need for intervention unless they are deemed inadequate. Option D misinterprets the purpose of a wage floor; it is not set when wages are high, but rather to protect workers from unlivable pay levels. Thus, the rationale for a wage floor centers on addressing low wages.
Which amendment has been interpreted to prohibit a state from collecting taxes to pay the salary of a leader of a religious group?
- A. Amendment 1
- B. Amendment 4
- C. Amendment 6
- D. Amendment 10
Correct Answer & Rationale
Correct Answer: A
Amendment 1 of the U.S. Constitution guarantees the free exercise of religion and prohibits the government from establishing a religion. This has been interpreted to mean that states cannot use tax revenues to fund religious leaders, ensuring a separation of church and state. Amendment 4 protects against unreasonable searches and seizures, which does not pertain to taxation or religious funding. Amendment 6 guarantees the right to a fair trial, unrelated to taxation issues. Amendment 10 reserves powers not delegated to the federal government for the states, but it does not address the specific prohibition against state funding of religious salaries.
Amendment 1 of the U.S. Constitution guarantees the free exercise of religion and prohibits the government from establishing a religion. This has been interpreted to mean that states cannot use tax revenues to fund religious leaders, ensuring a separation of church and state. Amendment 4 protects against unreasonable searches and seizures, which does not pertain to taxation or religious funding. Amendment 6 guarantees the right to a fair trial, unrelated to taxation issues. Amendment 10 reserves powers not delegated to the federal government for the states, but it does not address the specific prohibition against state funding of religious salaries.
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.
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.