Country A's Cost of Widgets Is $4

question 75

Multiple Choice

Country A's cost of widgets is $4.00 and cost of wadgets is $8.00. Country B's cost of widgets is 8 euros and cost of wadgets is 16 euros. Which of the following would you suggest?

• A) Country A should specialize in widgets and Country B in wadgets.
• B) Trade of widgets for wadgets would not benefit the countries.
• C) Country A should specialize in wadgets and Country B in widgets.
• D) Both countries should produce an equal amount of each.

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Definitions:

Short Run

A time period in economics during which at least one input is fixed and cannot be changed.

Economic Profit

The difference between total revenue and both explicit and implicit costs; the profit that exceeds the opportunity cost of resources.

Perfectly Competitive Markets

Markets in which no individual buyer or seller has any significant impact on prices and products are perfect substitutes.

Minimum ATC

The lowest point on the Average Total Cost curve, indicating the most efficient scale of production for a firm in the long run.