Given the Following Constant-Cost Production-Possibilities Frontiers for Pakistan and India

question 10

Multiple Choice

Given the following constant-cost production-possibilities frontiers for Pakistan and India:

Pakistan has an autarky relative price of __________; if trade begins with India, then Pakistan would produce at point __________, assuming complete specialization.

• A) 1 cloth:0.5 wheat ; (i.e., P_cloth/P_wheat = 0.5); A
• B) 1 cloth:0.5 wheat ; (i.e., P_cloth/P_wheat = 0.5); B
• C) 1 cloth:2 wheat ; (i.e., P_cloth/P_wheat = 2); A
• D) 1 cloth:2 wheat ; (i.e., P_cloth/P_wheat = 2); B

---

Definitions:

Normal Goods

Goods for which demand increases as consumer income rises, and decreases as consumer income falls.

Inferior Goods

Goods for which demand decreases as consumer income rises, in contrast to normal goods, where demand increases with higher incomes.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, reflecting the sensitivity of consumers to price changes.

Quantity Supplied

The total amount of a specific good or service that is available to consumers at a given price point and time.