Consider Two Countries That Can Produce Wheat and Coffee

question 53

Multiple Choice

Consider two countries that can produce wheat and coffee. The gains from trade when the two countries have different opportunity costs are realized when

• A)each country has an absolute advantage in one of the two commodities.
• B)the two countries continue to produce the same quantities of wheat and coffee.
• C)resources are reallocated within the two countries such that each specializes in the production of the good in which it has a comparative advantage.
• D)production possibility boundaries shift inward.
• E)resources are reallocated within the two countries such that each specializes in the production of the good in which it has an absolute advantage.

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