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chapter3

# chapter3 - QUICKQUIZ 1.,twogoods,andtwocountries.

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QUICK QUIZ 1. Assume that there are two inputs, two goods, and two countries. Assume that for any set of factor prices, a KX /a LX = a KY /a LY and b KX /b LX = b KY /b LY The two countries' production possibilities frontiers (a) would be concave, or bowed out from the origin. (b) would be convex, or bowed in from the origin. (c) would be straight lines. (d) would be undefined. (e) would be identical. (f) (c) and (e). 2. A firm's production function is X= 5LK. If the wage rate is \$10 and the capital rental rate is \$20 per unit, which of the following input combinations would the firm prefer to use to produce 250 units of good X? (a) L=50; K= 1. (b) L=25; K = 2. (c) L=10; K=5. (d) L=5; K= 10. (e) L=2; K=25. (f) the firm would be indifferent, because all the above combinations satisfy the production function. 3. A country will capture a larger share of the gains from trade 4. Under increasing costs, if tastes are identical in two countries

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chapter3 - QUICKQUIZ 1.,twogoods,andtwocountries.

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