Suppose that Spain has a comparative advantage in hats and Portugal has a comparative advantage in doormats. Under a system of free trade, each country specializes and then trades with the other. If the price starts at four hats per doormat, and then increases to five hats per doormat, then:
A. people in Portugal will not want to buy as many hats.
B. Spain no longer has a comparative advantage in hats.
C. some of the gains from trade shift to Spain.
D. some of the gains from trade shift to Portugal.
Answer: D
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A) the interest rate decreased. B) real GDP decreased. C) the price level increased. D) the Federal Reserve sold Treasury securities.
In order to increase the supply of a good, producers must
A. see an increase in quantity supplied by competitors. B. reduce their per-unit costs of producing the good. C. convince consumers to reduce the quantity demanded. D. cut back on labor to reduce production costs.
A report on the dangers of cholesterol would likely shift the demand curve for beef downward and to the left.
Answer the following statement true (T) or false (F)
The above figure shows a consumption function and a 45-degree line. Real consumption is a function of disposable income
Why is real GDP used here instead? What is measured along the vertical axis? What is measured by point B? Explain the significance of point A.