In Alvia, one worker in one day makes 10 wheat or 5 cloth, with a constant trade-off. How much wheat does making 1 cloth cost?

Answer: ______________

With resources held equal, what distinguishes absolute advantage from comparative advantage?

• Output versus opportunity cost
• Opportunity cost versus total output
• Output per worker versus output per hour

In Betta, one worker in one day makes 4 wheat or 4 cloth, with a constant trade-off. What is the wheat cost of 1 cloth?

• 4 wheat
• 2 wheat
• 1 wheat

With constant opportunity costs and no trade costs, what can both countries gain from specialising by comparative advantage and trading on mutually beneficial terms?

• More of both goods produced by each country
• Consumption beyond domestic production limits
• A larger productive capacity without extra resources

In one worker-day, Alvia can make 10 wheat or 5 cloth; Betta can make 4 wheat or 4 cloth. Trade-offs are constant. Which country has the comparative advantage in cloth?

• Alvia, since it makes more wheat
• Betta, with the lower sacrifice
• Neither, since Alvia is better at both

One country has absolute advantage in both goods, but the two countries have different constant opportunity costs. Why can they still gain from trade?

• Each can specialise at a lower relative sacrifice
• The less productive country has the lower cost in both goods
• Equal output per worker is required before either country gains

Alvia imports cloth from Betta through mutually beneficial trade in the two-good model. A tariff blocks these imports to protect Alvia's cloth makers. What is the wider cost?

• Lost gains from specialisation
• Only a transfer to producers, with no lost trade gains
• Higher consumption of both goods through self-sufficiency

In a two-good model with different constant opportunity costs and no trade costs, any swap rate allows both countries to gain from specialisation and trade.

Circle one:   True   False