The island nation of Sonorez produces 200 tons of wheat and 500 tons of corn. Munisia, its neighboring country, produces 400 tons of wheat and corn each. Sonorez would like to consume another 80 tons of wheat and is willing to give up a 100 tons of corn for it. Munisia on the other hand would like an extra 50 tons of corn and is willing to give up 100 tons of wheat. Which of the following conclusions can be drawn from this?
a. The 2 countries will not trade because they will not come to a common bargain.
b. Sonorez will trade 100 tons of wheat for extra corn.
c. Munisia will trade 100 tons of corn for extra wheat.
d. Sonorez will trade 50 - 100 tons of corn with Munisia for 80 - 100 tons of wheat.
Question 2
If long-run costs are plotted on the vertical axis and quantity of output plotted on the horizontal axis, a positively sloped line implies _____.
a. constant returns to scale
b. economies of scale
c. diseconomies of scale
d. an increase in capital-labor ratio
e. a decrease in cost-output ratio
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