Section A: True/False/Uncertain statements. Answer TEN questions. State first whether each is TRUE/FALSE/UNCERTAIN and then briefly justify your answer. Marks will be awarded only for the justification you give. [5 marks per question] 1. The UK produces 1kg of Cheese using 2 workers, while it produces 1L of Wine using 2 workers. The US produces 1kg of Cheese using 2 workers, while it produces 1L of Wine using 1 worker. Then, the UK has a comparative advantage in producing Cheese. 2. Suppose the production function of a firm is Q = K + L, where Q denotes the amount produced, K denotes the amount of capital used in production and L denotes the amount of labour. Then the average cost of production of this firm does not change as output changes.
