Given the Following Graph Showing Production-Possibilities Frontiers for Country a and Country

question 2

Multiple Choice

Given the following graph showing production-possibilities frontiers for country A and country B in a situation where both countries are on the same community indifference curve S₁ in autarky:

Prior to trade, P_X/P_Y in country A is __________ P_X/P_Y in country B, and, when trade begins, country A will import good __________.

• A) greater than; X
• B) greater than; Y
• C) less than; X
• D) less than; Y

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Definitions:

Debt Financing

A method of raising capital through the borrowing of money, which needs to be repaid at a later date, often with interest.

Lessee

An individual or entity that leases or rents property from a lessor.