If Country A uses all of the resources at its disposal, it can produce a maximum of 500 watches or 200 televisions. Within the same time frame, if Country B uses all of its resources, it can produce a maximum of 200 watches or 100 televisions. Which of the following must be true?(1 point)

Question

Responses

Country B has the absolute advantage in watch production, but Country A has the comparative advantage in watch production.
Country B has the absolute advantage in watch production, but Country A has the comparative advantage in watch production.

Country A has the absolute advantage and the comparative advantage in watch production.
Country A has the absolute advantage and the comparative advantage in watch production.

Country B has the absolute advantage and the comparative advantage in watch production.
Country B has the absolute advantage and the comparative advantage in watch production.

Country A has the absolute advantage in watch production, but Country B has the comparative advantage in watch production.
2.Which of the following will likely occur if Israel imposes a quota on automobiles imported from the United States?(1 point)
Responses

Israeli consumers will purchase fewer automobiles, and Israeli producers will manufacture more automobiles.
Israeli consumers will purchase fewer automobiles, and Israeli producers will manufacture more automobiles.

Israeli consumers will purchase more automobiles, and Israeli producers will manufacture more automobiles.
Israeli consumers will purchase more automobiles, and Israeli producers will manufacture more automobiles.

Israeli consumers will purchase more automobiles, and Israeli producers will manufacture fewer automobiles.
Israeli consumers will purchase more automobiles, and Israeli producers will manufacture fewer automobiles.

Israeli consumers will purchase fewer automobiles, and Israeli producers will manufacture fewer automobiles.
3.Which of the following resulted from the recent renegotiation of NAFTA?(1 point)
Responses

Government contracts were offered to all members.
Government contracts were offered to all members.

The economic gap decreased between member nations.
The economic gap decreased between member nations.

Agricultural trade was improved across all member nations.
Agricultural trade was improved across all member nations.

A uniform currency was established for all member nations.

Answer 1

Question 1

To determine the absolute and comparative advantage, we need to analyze the production possibilities.

• Country A can produce:
  • 500 watches
  • 200 televisions
• Country B can produce:
  • 200 watches
  • 100 televisions

Absolute Advantage:

• Country A has the absolute advantage in both watches and televisions because it can produce more of both than Country B.

Comparative Advantage: To find the comparative advantage, we need to calculate the opportunity cost for each country.

For Country A:

• Opportunity cost of 1 watch = 200 televisions / 500 watches = 0.4 televisions per watch.
• Opportunity cost of 1 television = 500 watches / 200 televisions = 2.5 watches per television.

For Country B:

• Opportunity cost of 1 watch = 100 televisions / 200 watches = 0.5 televisions per watch.
• Opportunity cost of 1 television = 200 watches / 100 televisions = 2 watches per television.

Now, comparing the opportunity costs:

• Country A has a lower opportunity cost for watches (0.4 TVs) compared to Country B (0.5 TVs). Thus, Country A has a comparative advantage in watch production.

Answer to Question 1:

• Country A has the absolute advantage and the comparative advantage in watch production.

Question 2

If Israel imposes a quota on automobiles imported from the United States, it limits the number of automobiles that can be imported. This means:

• Domestic (Israeli) producers are likely to increase production because demand still exists for automobiles, but imports are limited.
• Consumers will have fewer choices and may end up purchasing fewer imported automobiles due to the quota restrictions.

Answer to Question 2:

• Israeli consumers will purchase fewer automobiles, and Israeli producers will manufacture more automobiles.

Question 3

The renegotiation of NAFTA (now known as the USMCA) aims to address trade relationships and economic conditions among member nations. One of the significant outcomes of the renegotiation was improvements related to certain sectors, like agriculture, but not the establishment of a uniform currency or an overall guarantee to decrease economic gaps.

Answer to Question 3:

• Agricultural trade was improved across all member nations.