Suppose that in Colombia one unit of labor can produce either 8 tons of papayas or 2 tons of bananas and in Brazil one unit of labor can produce either 4 tons of papayas or 1 ton of bananas. Given this information, which of the following statements is true?
A. Columbia has a comparative advantage in producing papayas but not bananas.
B. These countries would increase combined consumption if they specialized and traded.
C. These countries cannot gain from trading.
D. Columbia has a comparative advantage in producing papayas and bananas.
Answer: C
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A country temporarily producing a combination of 12 units of guns and 5 units of butter would be ________________ (outside/on/inside) the production possibilities curve.
The national defense argument for trade protectionism holds that
A) what is good for business is good for the country. B) what is good for consumers is good for the country. C) consumers' surplus rises by more than producers' surplus falls. D) producers' surplus rises by more than consumers' surplus falls. E) none of the above
Figure 5-8
In Figure 5-8, the consumer is indifferent between the combinations of beer and wine coolers indicated by points
a.
A, C.
b.
B, D.
c.
C, B.
d.
A, B.
Regular interest payments made to bondholders are called ________ payments.
A. reserve B. coupon C. dividend D. diversification