Suppose That, with Constant Opportunity Costs, Spain Can Produce 2,000

question 23

Multiple Choice

Suppose that, with constant opportunity costs, Spain can produce 2,000 units of clothing if it devotes all of its resources to clothing production and 8,000 units of wheat if it devotes all of its resources to wheat production. If Spain is opened to trade at a world price ratio of 1 wheat:0.4 clothing (or 1 clothing:2.5 wheat) , Spain will export __________; if the world price ratio were 1 wheat:4 clothing (or 1 clothing:2.5 wheat) , Spain would __________.

• A) wheat; also export wheat
• B) wheat; would export clothing
• C) clothing; also would export clothing
• D) clothing; would be indifferent to trade

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