Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. When trade opens up, the United States should produce:
A. apples, since they have a comparative advantage in the production of apples, and not trade.
B. only apples, since they have a comparative advantage in the production of apples, and trade for shoes.
C. only shoes, since they have a comparative advantage in the production of shoes, and not trade.
D. both goods, since they have an absolute advantage in both goods, and not trade.
Answer: B
You might also like to view...
When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Scarcity means we must
A) consume less. B) produce less. C) make choices. D) earn more. E) work more.
The discount rate is the
A) banks' real interest rate. B) interest rate at which the Fed will loan reserves to commercial banks. C) interest rate banks charge the Fed when the Fed borrows from the banks. D) name of the interest rate banks charge their most credit-worthy borrowers. E) interest rate paid on U.S. government securities.
The expansion path of product indifference curves shows the cost-minimizing combination of inputs.
Answer the following statement true (T) or false (F)