Consider a Two-Country Two-Good Model Where Labor Is the Only

question 36

Multiple Choice

Consider a two-country two-good model where labor is the only factor of production. Each country faces an increasing-cost production-possibility curve. In this model the amounts of both goods that are produced in a country in no-trade situation are determined by:

• A)the relative prices of the goods.
• B)the factor endowments in the economy.
• C)technology differences between the industries.
• D)the aggregate demand in the economy.

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Definitions:

Positive Economics

The branch of economics that focuses on describing and explaining economic phenomena as it actually exists.

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The gases and particles that are released into the atmosphere by vehicles powered by internal combustion engines, contributing to air pollution.

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