If Two Countries Each Produce Wool and Cotton, the Country

question 48

Multiple Choice

If two countries each produce wool and cotton, the country with the higher opportunity cost for cotton (in terms of wool) will also have

• A)an absolute advantage in the production of cotton.
• B)an absolute advantage in the production of both wool and cotton.
• C)a comparative advantage in the production of cotton.
• D)a comparative advantage in the production of wool.
• E)an absolute advantage in the production of wool.

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Definitions:

Demand Elasticities

Measures the responsiveness of demand for a good or service to changes in its price or other factors.

Tax Incidence

The analysis of the effect of a particular tax on the distribution of economic welfare.

Specific Excise Taxes

Taxes imposed on a particular good or service, charged by quantity rather than value, such as per gallon or per pack.

Consumer Goods

Products that are sold directly to consumers for their personal or household use.