Practice_Problems_01 - Notes01: 1 E) 2...

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Notes 01: Answers to Practice Problems 1. E) Economics is the study of how people make decisions in the presence of scarcity. 2. A) Gains from trade is the extent to which individuals, firms, or nations benefit by engaging in exchange. 3. C) Canada’s marginal cost of producing 1 ton of wheat is found by reducing 10 tons of apples divided by 50 tons of wheat, giving 10/50=1/5. 4. B) The United States has a marginal cost of producing wheat of 5/20=1/4, so Canada’s cost is lower. The country with the lowest marginal cost has comparative advantage. 5. To produce 11 tons of apples, the United States should specialize in apples, producing 5
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