If a Country Has an Absolute Advantage in Producing All

question 182

Multiple Choice

If a country has an absolute advantage in producing all goods

• A) it should produce all those goods.
• B) it should ask its trading partners which goods it should specialize in.
• C) it would not gain from trade.
• D) there are still benefits to specialization and trade.

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Definitions:

Fractional Reserves

A banking system in which banks hold a fraction of their depositors' funds in reserve, lending out the remainder to earn interest.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen, representing the benefits an individual, investor, or business misses out on when choosing one option over another.

Fiat Money

Currency that a government has declared to be legal tender, despite it lacking intrinsic value and not being backed by physical commodities.

Legal Tender

Government-issued currency that, by law, must be accepted as a form of payment within the country.