Refer to the Above Diagrams

question 9

Multiple Choice

Refer to the above diagrams.The solid lines are production possibilities curves; the dashed lines are trading possibilities curves.The trading possibilities curves imply that:

• A)both countries are experiencing an excess of exports over imports which results in economic growth.
• B)the domestic production possibilities curves entail unemployment and/or the domestic misallocation of resources.
• C)world resources will be allocated more efficiently if the two nations specialize and trade in accordance with comparative advantage.
• D)both nations will be worse off as a result of international specialization and trade.

---

Definitions:

Utility Function

A concept in economics that defines how individuals or entities decide among various alternatives based on the perceived happiness or satisfaction each option will provide.

Income

The amount of money received on a regular basis from work, property, business, investment, or welfare payments.

Price

The amount of money required to purchase a good or service, determined by various factors including supply, demand, cost of production, and market conditions.

Utility Function

A representation in economic theory of how a consumer ranks different bundles of goods based on the level of satisfaction (utility) they provide.