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Q. B) A and B satisfy same kinds of desires (like tea and coffee) and re is a shift in tastes away from A and towards B. c) A is a normal good, while B is an inferior good. Incomes of all consumers in this market rise. D) A and B are complements. A) What is opportunity cost of producing one more winter hat in US? In Russia? B) What is opportunity cost of producing one more bushel of wheat in US? In Russia? C) Which country has a comparative advantage in winter hats? In wheat? D) If US decides to produce one less winter hat and Russia decides to produce one more winter hat, what should happen to wheat production? Show that you understand by filling in following table. What are gains from specialization here? E) If exchange rate were 1,000 rubles/$US, would mutually beneficial trade occur? If yes explain. If no, n which way would exchange rate move? F) If exchange rate were 100 rubles/$US, would mutually beneficial trade
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