These are original Marlbridge practice questions, not past exam questions. All countries and people are fictional, and all data are fictional. The rubrics are a suggested Marlbridge rubric to help you check your work; they are not an official scoring guideline. Assumptions: every PPC is a straight line (constant opportunity cost); producers in each question have the same quantity of resources; there are no transport costs; a four-function calculator is enough.
Question 1 (multiple choice · foundation)
Using all of its resources for a month, each country can produce the following.
| Country | Tea (tonnes) | Steel (tonnes) |
|---|---|---|
| Valdoria | 80 | 40 |
| Kestria | 60 | 20 |
Which statement is correct?
- (A) Valdoria has a comparative advantage in both tea and steel.
- (B) Kestria has a comparative advantage in tea.
- (C) Kestria has an absolute advantage in tea.
- (D) Valdoria has a comparative advantage in tea because it can produce more tea.
Answer and explanation
Answer: (B). Kestria’s opportunity cost of 1 tonne of tea is 20 ÷ 60 = 1/3 tonne of steel. Valdoria’s is 40 ÷ 80 = 1/2 tonne of steel. Kestria gives up less steel per tonne of tea, so it has the comparative advantage in tea.
- (A) confuses comparative with absolute advantage. Valdoria has the absolute advantage in both goods, but with two goods it cannot have the comparative advantage in both.
- (C) is wrong: Kestria produces less tea (60 < 80), so Valdoria has the absolute advantage in tea.
- (D) uses absolute advantage (more output) to decide comparative advantage. Valdoria’s comparative advantage is actually in steel (2 tonnes of tea per tonne of steel, against Kestria’s 3).
Question 2 (multiple choice · foundation)
Kestria’s straight-line PPC for kites and drums runs from 45 kites (and no drums) to 15 drums (and no kites). What is Kestria’s opportunity cost of producing 1 drum?
- (A) 1/3 kite
- (B) 3 kites
- (C) 15 kites
- (D) 30 kites
Answer and explanation
Answer: (B). Moving from all kites to all drums gives up 45 kites to gain 15 drums. Each drum costs 45 ÷ 15 = 3 kites. This is also the size of the PPC’s slope.
- (A) is the opportunity cost of 1 kite (15 ÷ 45 = 1/3 drum), written with the wrong unit. The ratio is upside down.
- (C) is the maximum number of drums, not a cost per drum.
- (D) subtracts the intercepts (45 − 15), which mixes two different goods.
Question 3 (multiple choice · core)
The table shows the number of hours each carpenter needs to make one unit.
| Carpenter | Hours per chair | Hours per table |
|---|---|---|
| Ana | 6 | 12 |
| Ben | 4 | 10 |
Which statement is correct?
- (A) Ana has a comparative advantage in tables.
- (B) Ana has an absolute advantage in chairs.
- (C) Ben has a comparative advantage in both chairs and tables.
- (D) Ben has a comparative advantage in tables because he needs fewer hours to make one.
Answer and explanation
Answer: (A). With input data, the opportunity cost of 1 table = hours per table ÷ hours per chair. Ana: 12 ÷ 6 = 2 chairs. Ben: 10 ÷ 4 = 2.5 chairs. Ana gives up fewer chairs per table, so she has the comparative advantage in tables. (Ben has it in chairs: 4 ÷ 10 = 0.4 table, against Ana’s 6 ÷ 12 = 0.5 table.)
- (B) applies the output rule to input data. Ana needs more hours per chair (6 > 4), so Ben has the absolute advantage in chairs.
- (C) is impossible with two goods and different opportunity costs.
- (D) confuses absolute advantage (fewer hours) with comparative advantage (lower opportunity cost).
Question 4 (multiple choice · core)
Use the data in Question 1. Valdoria specialises in steel and Kestria specialises in tea. Which of the following terms of trade would make both countries better off than producing for themselves?
- (A) 1 tonne of steel for 3.5 tonnes of tea
- (B) 1 tonne of tea for 0.6 tonne of steel
- (C) 1 tonne of steel for 2.5 tonnes of tea
- (D) 1 tonne of steel for 2 tonnes of tea
Answer and explanation
Answer: (C). One tonne of steel costs Valdoria 2 tonnes of tea and costs Kestria 3 tonnes of tea. Both gain only if 1 tonne of steel trades for more than 2 but fewer than 3 tonnes of tea. 2.5 is inside that range.
- (A) is above 3. Kestria would pay 3.5 tonnes of tea for steel it can make itself for 3, so Kestria is worse off.
- (B) means 1 tonne of steel for 1 ÷ 0.6 ≈ 1.67 tonnes of tea. That is below 2, so Valdoria receives less tea than it gives up to make the steel. Valdoria is worse off.
- (D) is exactly Valdoria’s opportunity cost. Valdoria is no better off than making tea itself, so it does not gain.
Question 5 (calculation · core)
Two Valdorian craft workers, Lina and Omar, make cakes and scarves. The table shows the hours each needs to make one unit. Each works 30 hours a week.
| Worker | Hours per cake | Hours per scarf |
|---|---|---|
| Lina | 2 | 5 |
| Omar | 3 | 6 |
(a) Calculate how many cakes or how many scarves each worker can make in a 30-hour week. (b) Identify who has the absolute advantage in each good. (c) Calculate each worker’s opportunity cost of 1 scarf and of 1 cake, and identify who has the comparative advantage in each good. (d) Lina and Omar agree to trade 1 scarf for 2.2 cakes. Is this mutually beneficial? Explain.
Worked solution
(a) Lina: 30 ÷ 2 = 15 cakes or 30 ÷ 5 = 6 scarves. Omar: 30 ÷ 3 = 10 cakes or 30 ÷ 6 = 5 scarves.
(b) Lina makes more of both goods in the same time (and needs fewer hours for each), so Lina has the absolute advantage in both.
(c) Opportunity cost of 1 scarf: Lina 5 ÷ 2 = 2.5 cakes; Omar 6 ÷ 3 = 2 cakes. Opportunity cost of 1 cake: Lina 2 ÷ 5 = 0.4 scarf; Omar 3 ÷ 6 = 0.5 scarf. Omar has the comparative advantage in scarves; Lina has it in cakes. (The output data from (a) give the same results: 15 ÷ 6 = 2.5 and 10 ÷ 5 = 2.)
(d) Yes. Mutually beneficial terms are 1 scarf for between 2 and 2.5 cakes. Omar sells a scarf for 2.2 cakes, more than the 2 cakes it costs him. Lina buys a scarf for 2.2 cakes, less than the 2.5 cakes it would cost her to make it.
Suggested mark points (4): 1 for the outputs in (a); 1 for absolute advantage in both to Lina; 1 for correct opportunity costs leading to Omar–scarves and Lina–cakes; 1 for “yes” with both sides’ comparison in (d). In (d), a bare statement that 2.2 is “in the range” earns the point only if the correct range (2 to 2.5 cakes per scarf) is also stated.
Question 6 (constructed response · core)
Using all of its resources for a month, each country can produce the following. Both have straight-line PPCs.
| Country | Maize (tonnes) | Radios |
|---|---|---|
| Valdoria | 100 | 50 |
| Kestria | 60 | 20 |
Before trade, Valdoria produces and consumes 60 tonnes of maize and 20 radios; Kestria produces and consumes 30 tonnes of maize and 10 radios.
(a) Calculate each country’s opportunity cost of 1 radio. (b) Identify which country has the comparative advantage in maize. Explain using opportunity cost. (c) Kestria now specialises completely in maize. Valdoria produces 36 tonnes of maize and 32 radios. They trade 30 tonnes of maize for 12 radios. Show that these terms of trade are mutually beneficial. (d) Calculate each country’s consumption of both goods after trade, and state each country’s gain. (e) Draw a correctly labelled PPC for Kestria. Plot its before-trade consumption point, labelled A, and its after-trade consumption point, labelled B.
Worked solution and suggested Marlbridge rubric
(a) Valdoria: 100 ÷ 50 = 2 tonnes of maize per radio. Kestria: 60 ÷ 20 = 3 tonnes of maize per radio.
(b) Kestria. Its opportunity cost of 1 tonne of maize is 20 ÷ 60 = 1/3 radio, lower than Valdoria’s 50 ÷ 100 = 1/2 radio.
(c) 30 tonnes for 12 radios = 30 ÷ 12 = 2.5 tonnes of maize per radio. This is between Valdoria’s opportunity cost (2) and Kestria’s (3). Valdoria receives 2.5 tonnes for a radio that costs it 2; Kestria pays 2.5 tonnes for a radio that would cost it 3. Both gain.
(d) Valdoria: maize 36 + 30 = 66 tonnes; radios 32 − 12 = 20. Before: 60 tonnes and 20 radios, so a gain of 6 tonnes of maize. Kestria: maize 60 − 30 = 30 tonnes; radios 12. Before: 30 tonnes and 10 radios, so a gain of 2 radios.
(Valdoria’s production point is on its PPC: 36/100 + 32/50 = 0.36 + 0.64 = 1.)
(e) Axes labelled “Maize (tonnes)” and “Radios” (either way round). A straight-line PPC from 60 tonnes of maize to 20 radios. Point A at (30 maize, 10 radios) on the PPC. Point B at (30 maize, 12 radios) outside the PPC. On its own, Kestria could have at most (60 − 30) ÷ 3 = 10 radios with 30 tonnes of maize.
| Point | What earns it |
|---|---|
| 1 | Both opportunity costs of a radio correct (2 and 3 tonnes of maize) |
| 1 | Kestria identified, supported by a comparison of opportunity costs (either good) |
| 1 | 2.5 tonnes per radio shown to lie between the two opportunity costs |
| 1 | Both after-trade consumption bundles correct, with gains of 6 tonnes (Valdoria) and 2 radios (Kestria) |
| 1 | Labelled axes and a straight-line PPC with correct intercepts (60 and 20) |
| 1 | A on the PPC and B outside it at the correct values |
Accept values carried forward from an earlier error. In (b), “Kestria, because it is worse at radios” does not earn the point; the answer must compare opportunity costs.
Question 7 (constructed response · stretch)
Using all of their resources for a week, two islands can produce the following.
| Island | Fish (crates) | Coconuts (crates) |
|---|---|---|
| Valdoria | 40 | 80 |
| Kestria | 30 | 60 |
(a) Show that neither island has a comparative advantage, and explain why no terms of trade could benefit both islands. (b) New climbing equipment doubles Kestria’s maximum coconut output to 120 crates; its fish output is unchanged. Identify each island’s comparative advantage now, and state the range of mutually beneficial terms of trade for 1 crate of fish. (c) A trader proposes 1 crate of fish for 5 crates of coconuts. Which island would refuse? Explain.
Model answer and suggested Marlbridge rubric
(a) Opportunity cost of 1 crate of fish: Valdoria 80 ÷ 40 = 2 coconuts; Kestria 60 ÷ 30 = 2 coconuts. The opportunity costs are equal, so neither island has a comparative advantage. Any terms of trade better than 2 coconuts per fish for one island must be worse than 2 for the other, so one island always gains nothing or loses. There are no gains from trade.
(b) Kestria’s opportunity cost of 1 crate of fish is now 120 ÷ 30 = 4 coconuts, and of 1 crate of coconuts is 30 ÷ 120 = 1/4 crate of fish. Valdoria’s are still 2 coconuts and 1/2 crate of fish. Valdoria has the comparative advantage in fish (2 < 4); Kestria has it in coconuts (1/4 < 1/2). Mutually beneficial terms: 1 crate of fish for between 2 and 4 crates of coconuts.
(c) Kestria refuses. It would be buying fish. Five crates of coconuts per crate of fish is more than the 4 crates it gives up to catch a crate of fish itself, so it is better off producing its own fish. (Valdoria would happily accept, which shows the terms are not mutually beneficial.)
| Point | What earns it |
|---|---|
| 1 | Equal opportunity costs (2 coconuts per fish) shown for both islands |
| 1 | Explains that equal opportunity costs leave no terms that make both better off |
| 1 | New opportunity costs and comparative advantages correct (Valdoria fish, Kestria coconuts) |
| 1 | Range of 2 to 4 coconuts per crate of fish |
| 1 | Kestria refuses, because 5 is more than its own opportunity cost of 4 |
In (b), saying “Kestria now has the absolute advantage in coconuts” is true but does not earn the comparative-advantage point on its own.
How did you do?
- Q1, Q2 or Q6(a)–(b) wrong: re-read “Finding opportunity costs from a table or a PPC” and Worked example 1 in the study guide.
- Q3 or Q5 wrong: revisit Worked example 3 on input tables; check which good goes on top.
- Q4, Q5(d), Q6(c) or Q7 wrong: re-read “Specialisation and the terms of trade”.
- Q6(d)–(e) wrong: revisit Worked example 2 and Figure 1.
Then tick off the topic checklist.