(Table) Allow the United States to Produce at Point C

question 147

Multiple Choice

(Table) Allow the United States to produce at point C and Chile to produce at point K on the production possibilities schedules. Now, let the United States trade away 6 loaves of bread in return for 20 bushels of avocados. Which statement is TRUE? $$\begin{array}{l}\text { U.S. Production Possibilities }\\\begin{array} { c c c } & \begin{array} { c } \text { Bread } \\\text { (loaves) }\end{array} & \begin{array} { c } \text { Avocados } \\\text { (bushels) }\end{array} \\\text { A } & 100 & 0 \\\text { B } & 80 & 10 \\\text { C } & 60 & 20 \\\text { D } & 40 & 30 \\\text { E } & 20 & 40 \\\text { F } & 0 & 50 \\& & \\& \text { Chile Production Possibilities } \\& \text { Bread } & \text { Avocados } \\& \text { (loaves) } & \text { (bushels) } \\\text { G } & 15 & 0 \\\text { H } & 12 & 12 \\\text { I } & 9 & 24 \\\text { J } & 6 & 36 \\\text { K } & 3 & 48 \\\text { L } & 0 & 60\end{array}\end{array}$$

• A) Both countries are better off from this trade because they both consume outside their production possibilities frontier (PPF).
• B) Both countries are better off from this trade because they both produce outside their PPF.
• C) Only the United States is better off from this trade.
• D) Only Chile is better off from this trade.

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Definitions:

Supply and Demand

The fundamental economic model describing how prices fluctuate based on the interplay between the quantity of a good available and the desire for that good.

Macroeconomic Analysis

The study of the behavior, structure, and decision-making of an economy as a whole, including topics like inflation, unemployment, and economic growth.

Microeconomic Analysis

The study of the behavior of individuals and firms in making decisions regarding the allocation of limited resources.

Household Income

The total amount of monetary earnings and benefits received by all members of a household.