Refer to Table 2-2. According to the law of comparative advantage, both Honduras and Nicaragua could gain if
a. Honduras produced all of the apples and oranges and Nicaragua did not produce anything.
b. Honduras specialized in producing apples, Nicaragua specialized in producing oranges, and they traded.
c. Honduras specialized in producing oranges, Nicaragua specialized in producing apples, and they traded.
d. Nicaragua and Honduras were both were self-sufficient and did not trade.
Answer: b. Honduras specialized in producing apples, Nicaragua specialized in producing oranges, and they traded.
You might also like to view...
The Phillips Curve will shift when
A) the overall employment rate remains unchanged. B) the expected inflation rate changes. C) the price level falls. D) none of the above.
The graph illustrates the market for British pounds, the currency of the United Kingdom. As the number of buyers of pounds increases and the number of sellers of pounds increases, the equilibrium price of a pound
A) will fall B) will rise. C) will remain the same. D) might rise, fall, or remain the same depending on whether the effect on buyers is larger than, less than, or the same as the effect on sellers. E) None of the above answers is correct.
Food stamps and Medicaid are in-kind transfer programs
a. True b. False
If crowding out exists, the expansionary effect of government spending will be:
a. smaller than intended. b. negative. c. infinite. d. larger than intended. e. zero.