Ithilium, a European Country, Is Able to Produce More Electronics

question 43

Multiple Choice

Ithilium, a European country, is able to produce more electronics than Kilim, a North American country, even though both countries use the same amount of resources. Given this information, it can be deduced that Ithilium has a(n) :

• A) comparative advantage over Kilim.
• B) higher trade surplus than Kilim.
• C) absolute advantage over Kilim.
• D) higher balance of payments surplus than Kilim.

---

Definitions:

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, leading to market balance.

Mutually Beneficial Trades

Exchanges between parties that provide benefits or gains to all involved, enhancing their welfare or utility.

Well-Functioning Markets

Markets that efficiently allocate resources through the mechanism of supply and demand, leading to optimal outcomes for both buyers and sellers.

Market System

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.