Suppose that after specializing according to comparative advantage, a country is trading with another nation that also specializes according to its comparative advantage. Which of the following statements are true for the first country?
i. It enjoys gains from trade.
ii. It must have an absolute advantage in the production of the good it produces.
iii. It is producing at a point beyond its PPF.
A) ii and iii B) i and iii C) i, ii, and iii D) i only E) i and ii
D
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The multiplier effect following an increase in expenditure is generated by induced increases in consumption expenditure as income rises
Indicate whether the statement is true or false
Allocative efficiency is achieved when firms produce goods and services
A) that consumers value most. B) at a marginal cost of zero. C) at the lowest possible cost. D) at the lowest opportunity cost.
When existing stocks of resources are being heavily utilized, actual output is
A) likely to grow much faster than natural output. B) likely to grow more slowly than natural output. C) equal to natural output. D) no longer tied to natural output.
Using the bathtub analogy to understand what determines the number of unemployed workers, the stock variables are
A) the number of workers finding jobs and the number of workers separating from their jobs. B) the number of workers separating from their jobs and the number of unemployed workers. C) the number of unemployed workers and the number of workers finding jobs. D) the number of workers finding jobs, the number of workers separating from their jobs, and the number of unemployed workers.