Suppose That Japan and India Are Both Engaged in the Production

question 107

Multiple Choice

Suppose that Japan and India are both engaged in the production of radios and rice, and that Japan has an absolute advantage in the production of both goods. If India has a lower opportunity cost for producing rice, then

• A) India has a comparative advantage in rice production, but there will be no gains from specialization and trade.
• B) Japan has a comparative advantage in the production of both goods.
• C) India has a comparative advantage in the production of rice, but it is outweighed by Japan's absolute advantage in rice production.
• D) India has a comparative advantage in the production of rice, and specialization and trade between the two countries can be mutually beneficial.

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Definitions:

Charge a Price

The act of assigning a monetary value to a product or service that customers must pay to obtain it.

Marginal Cost

is the cost incurred by producing one additional unit of a product or service.

Profits

The financial gain made in a transaction or operation, calculated as the difference between revenue and expenses.

Firm

A business organization, such as a corporation or partnership, that sells goods or services in exchange for revenue.