Suppose That Opportunity Costs Are Constant and That Fred Can

question 117

Multiple Choice

Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can produce a maximum of eight pies or two cakes in a day. Ethel has an comparative advantage in the production of

• A) cakes.
• B) pies.
• C) both cakes and pies.
• D) neither cakes nor pies.

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Definitions:

Aggregate Supply Curve

A graphical representation that shows the total quantity of goods and services that producers in an economy are willing and able to supply at different price levels.

Price Level

A measure of the average prices of goods and services in an economy, indicating the cost of living and inflation rates.

Explicit Resource Price

The monetary value that is directly paid for the use of a resource or asset, such as wages for labor or rent for land.

Aggregate Supply Curve

A graphical representation showing the relationship between the total supply of goods and services produced in an economy and the price level.