Suppose the World Consists of Two Countries: Germany and Spain

question 44

Multiple Choice

Suppose the world consists of two countries: Germany and Spain. Further, suppose there are only two goods, food and clothing. Which of the following statements is true?

• A) If Germany has an absolute advantage in the production of food, then Spain must have an absolute advantage in the production of clothing.
• B) none of these answers.
• C) If Germany has a comparative advantage in the production of food, Spain might also have a comparative advantage in the production of food.
• D) If Germany has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing.
• E) If Germany has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing.

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Definitions:

TC (Total Cost) Curve

A graphical representation that shows the total cost of production at different levels of output.

Value to Consumers

The maximum amount of money a consumer is willing to pay for a good or service, reflecting the perceived benefit or utility they expect to obtain.

Marginal Cost

Refers to the additional expense associated with producing one more unit of a good or service, reiterated in a new explanation.