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C11Practice - Practice Questions for Experiment 11 1 A...

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Practice Questions for Experiment 11 1. A nation’s production possibility set shows all the combinations of total outputs that can possibly be produced with the resources available in a country without engaging in trade with another country. Answer: True 2. If country A has an absolute advantage over country B in good 1 and country B has an absolute advantage over country A in good 2, then country B has a comparative advantage over country A in good 2. Answer: True 3. If trade is permitted between country A and country B, country A will produce only the good in which it has a comparative advantage, and country B will produce only the good in which it has a comparative advantage. Answer: False 4. The small island nation of Ruritania is populated by two farmers, Alf and Barney. Each farmer has 100 acres. The land can be used either for growing wheat or as pasture for beef cattle. Alf's land is better than Barney's land. Each acre that Alf plants to wheat will yield 50 bushels of wheat per year. Each acre that Alf devotes to pasture will yield 70 pounds of beef per year. Each acre that Barney plants to wheat will yield 25 bushels of wheat per year and each acre that Barney devotes to pasture will yield 30 pounds of beef per year. (a) Alf's farm has absolute advantage in the production of beef and comparative advantage in the production of wheat. (b) Barney's farm has comparative advantage in the production of beef. (c) Barney's farm has comparative advantage in the production of wheat. (d) Alf's farm has comparative advantage in both beef and wheat. (e) More than one of the above statements is true. Answer: C
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