When Two Countries Are Specializing and Trading with Each Other

question 9

Multiple Choice

When two countries are specializing and trading with each other, the gains from trade will tend to be greater when

• A)there are economies of scale in production.
• B)prices rise in both countries.
• C)the production possibilities boundaries shift inward.
• D)opportunity costs in the two countries are similar.
• E)comparative advantages are eliminated.

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Definitions:

Oligopoly Market

A market structure characterized by a small number of firms dominating the market, leading to limited competition and potentially strategic interactions among the firms.

Dominant Strategy

A strategic option that yields the best outcome for a player, irrespective of what strategies other players adopt.

Nash Equilibrium

A concept in game theory where no player can benefit by changing their strategy while the other players keep theirs unchanged.

Prisoner's Dilemma

A fundamental problem in game theory that demonstrates why two rational individuals might not cooperate, even if it appears that it is in their best interest to do so.