Two Countries Will Have Zero Incentive to Trade If Their

question 18

Multiple Choice

Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because

• A)The opportunity costs for both countries are the same.
• B)One country has an absolute advantage in the production of both goods,thus providing that country with no incentive for trade.
• C)One country has a comparative advantage in the production of both goods,thus providing that country with no incentive for trade.

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Definitions:

Marginal Cost

The extra expenditure involved in creating one additional unit of a product or service.

Gadgets Production

The manufacturing process of creating small electronic devices designed for a particular purpose or function.

Marginal Cost Curve

A graphical representation showing how the cost of producing one more unit depends on the quantity that has already been produced.

Total Profit

The total income a business receives from its operations minus the total costs incurred.