Refer to above figure. Now, suppose that the relative price of A is actually not higher than Albania's autarkic level of 1, but quite the opposite (e.g., PA/PB = 0.5)
Would Albania still be able to gain from trade? If so, where would be its production point? Given the information in this question, where is Albania's comparative advantage?
Yes. As long as the world's terms of trade differed from those of Albania, that country stands to gain from international trade. In this particular case, its point of production with trade would be at point c.
You might also like to view...
Which of the following economic variables is affected when the government adopts countercyclical fiscal policy?
A) Government spending B) Bank reserves C) Interest rates D) M2 measure of money supply
Rick was charged $200 while applying for an insurance claim for his damaged car. This is an example of ________
A) a subsidy B) a copayment C) a brokerage D) a dividend
Which of the following actions should be discussed with an attorney before undertaking as the action could be considered legal?
A) an agreement with a competitor firm to set prices B) an agreement with a competitor firm to not sell to a particular customer C) an agreement with a competitor firm to adjust output levels D) an agreement with a customer about the resale price the customer will charge for the product
A steel mill raises the price of steel by 20%, which results in a 7% reduction in the quantity of steel demanded. The demand curve facing this firm is: a. elastic
b. inelastic. c. unit elastic. d. unit inelastic.