Question

i am doing review for a test and was wondering these answers are correct

Part 1: Multiple choice (4 points each) 1. In the Ricardian advnntage nn model, comparative advantage is likely to be due to a scale economios b. greater capital availability per worker abor productivity diferences. political pressure. ppone that home can produce 300 units of good 1 in an hour ot 100 units of good2 rther, suppose that Foreign can produce 20 tunits of good 1 or 20 units of good 2 in has the abeolute ad yantage it ttd ott mo Home Foreign 3. Refer to the previous question. Who has the comparative advantage in the productionof good 1? 4. If a production possibilities frontier is a straight line, then production oceurs un a. increasing opportunity costs. constant opportunity costs. c. decreasing opportunity costs. d. infinite opportunity costs. 5. An increase in the quanity of labor for the Home conome should a. cause the PPF to shift i\" cause the PPF to shift out. c. cause the PPF to become steeper. d. cause the PPF to become flatter. 6. The Ricardian model of international trade demonstrates that trade can be mutually beneficial. W then, do governments restrict imports of some goods? The Ricardian model is often incorrect in its prediction that trade can be mutually beneficia Import restrictions are the result of trade wars between hostile countries. Trade can have substantial effects on a country's distribution of income. d. Restrictions on imports are intended to benefit domestic consumers. 7. In the Ricardian model, if aLi 2, a12 4, Home will fully specialize in good 1 if a. P/P 0.25 b. P/P2 0.35 c, p/Pg=0.45 4 @w乃=0.55

Answer 1

1. Answer: C. labor productivity difference.
Reason: According to Ricardo who propounded the theory of comparative advantage, it was differences in labour endowments that were the cause for comparative advantage in production of some goods.
2. Answer: A. Home.
Reason: The home country can produce 300 units of good 1 in an hour while the foreign produces only 20 units of the same good 1 in an hour. Clearly, Home is more efficient.
3. Answer: A. Home
Reason: In fact, Home has comparative advantage in both goods.
4. Answer: B
Reason: Constant opportunity costs.
Reason: The rate of trade off between goods is constant. This also means that the resources given up to produce suppose one unit of any good x is sufficient to produce one unit of other good y.
5. Answer: B. Cause the PPF to shift out.
Reason: The production possibility shows the combinations of goods that economy can produce given resources and technology. Any increase in resource ( labour ) would mean increase in productivity and more hands on, so the PPF shifts outward.
6. Answer: C. Trade can have substantial effect on a country's distribution of income.
Reason: because different industries hire different resources.
7. Answer : D. P1/P2= 0.55
Reason: Home country will specialise in good 1 if  2/4 = 0.5