Suppose the U.S. and Japan both produce airplanes and televisions and the U.S. has a comparative advantage in the production of airplanes while Japan has a comparative advantage in the production of televisions. If the U.S. exports airplanes to Japan and imports televisions from Japan,
a. both countries, as a whole, will be better off.
b. all individuals in both countries will be better off.
c. both countries, as a whole, will be worse off.
d. all individuals in both countries will be worse off.
a
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It is true of externalities that they
A. are always detrimental. B. are always beneficial. C. arise when all costs, social and private, are included in production cost. D. cause the price system to misallocate resources.
The slopes of the production possibilities curves for two nations reflect the
A. relative prices of the resources in the two nations. B. average income levels in the two nations. C. opportunity costs of production in the two nations. D. amounts of imports and exports of the two nations.
Economic rent refers to the price of a factor of production which is fixed in supply
Indicate whether the statement is true or false
Active stabilization policy can be rationalized in the New Keynesian model because
A) it makes it possible to obtain zero inflation. B) the government knows best. C) it counteracts the influence of unions. D) it allows a faster return to economic efficiency.