produce when they completely specialize in one or another product. The last two columns give each country's
consumption without trade.
Maximum
beer
production
Maximum
whiskey
production
Beer consumption
without trade
Beer consumption
without trade
Northern Ireland 500 kegs 1500 kegs 300 kegs 600 bottles
Southern Ireland 1200 kegs 800 kegs 600 kegs 400 bottles
Suppose that Northern Ireland and Southern Ireland each have 1,000 hours of labor per day. Southern workers are paid €1
per day and Northern workers are paid £1 per day. What is the approximate exchange rate associated with an international
price of one keg of beer = 1 bottle of whiskey?
€1.14 = £1
€0.80 = £1
€1 = £1
none of the options
References
Multiple Choice Difficulty: 2 Medium
The first two columns give the maximum daily amounts of beer and whiskey that Southern Ireland and Northern Ireland can
produce when they completely specialize in one or another product. The last two columns give each country's
consumption without trade.
Maximum
beer
production
Maximum
whiskey
production
Beer consumption
without trade
Beer consumption
without trade
Northern Ireland 500 kegs 1500 kegs 300 kegs 600 bottles
Southern Ireland 1200 kegs 800 kegs 600 kegs 400 bottles
Suppose that Northern Ireland and Southern Ireland each have 1,000 hours of labor per day. Southern workers are paid €1
per day and Northern workers are paid £1 per day. What is the approximate exchange rate associated with an international
price of one keg of beer = 1 bottle of whiskey?
Now suppose that Southern workers receive a raise to €2 per day. Will trade be possible at the exchange rate you found?
Yes
No
References
Yes / No Difficulty: 2 Medium
99.
Award: 1.00 point
100.
Award: 1.00 point
The first two columns give the maximum daily amounts of beer and whiskey that Southern Ireland and Northern Ireland can
produce when they completely specialize in one or another product. The last two columns give each country's
consumption without trade.
Maximum
beer
production
Maximum
whiskey
production
Beer consumption
without trade
Beer consumption
without trade
Northern Ireland 500 kegs 1500 kegs 300 kegs 600 bottles
Southern Ireland 1200 kegs 800 kegs 600 kegs 400 bottles
Suppose that Northern Ireland and Southern Ireland each have 1,000 hours of labor per day. Southern workers are paid €1
per day and Northern workers are paid £1 per day. What is the approximate exchange rate associated with an international
price of one keg of beer = 1 bottle of whiskey?
Now suppose that Southern workers are paid €1 per day but the Northern workers receive a raise to £2 per day. Will trade
be possible at the exchange rate you found?
Yes
No
References
Yes / No Difficulty: 2 Medium
Consider a dentist and a 14-year old boy. The dentist can make $100 per hour drilling teeth and the 14-year old boy can
make $2 per hour picking up used aluminum cans. The dentist can mow his half-acre lot in one hour. The 14-year old boy
can mow the lawn in two hours. If the dentist hires the boy to mow his lawn at any price less than $100, but more than $4
both he and the boy are better off.
the dentist would be exploiting the boy.
the boy would be exploiting the dentist.
all of the options
References
Multiple Choice Difficulty: 2 Medium
101.
Award: 1.00 point
Consider the no-trade input/output situation presented in the following table and graph for South and North Carolina.
Assume that free trade is legal.
Input/Output without Trade
Country
South Carolina North Carolina Total
I. Total Potential Output
(lbs. or yards; 000,000s)
Guns 500 250 750
Butter 1,000 750 1,750
II. Consumption
(lbs. or yards; 000,000s)
Guns 250 200 450
Butter 500 150 650
Which state is better at making guns?
South Carolina
North Carolina
The states are equally good at making guns.
It costs South Carolina 2 (1,000/500) pounds of butter to produce one additional gun. It costs North Carolina 3 (750/250)