Which of the Following Is Not Possible for Two Countries

question 301

Multiple Choice

Which of the following is not possible for two countries who trade computers and automobiles with one another?

• A) One of the countries has an absolute advantage in the production of both products.
• B) One of the countries has a comparative advantage in the production of both products.
• C) One country has an absolute advantage in one product and a comparative advantage in the other product.
• D) One country does not have an absolute advantage in either product but has a comparative advantage in one product.

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Definitions:

Currency Exchange

The act of converting one country's currency into another's, a key component in international trade and investment activities.

Domestic Currency

The currency that is legally in use within a country's borders, serving as the medium for exchange, a store of value, and a standard of account.

Exchange Rate

The value of one currency when being converted to another currency.

Base Currency

The currency against which exchange rates are generally quoted in a given country, typically the currency of the home market.