Suppose That a Worker in Radioland Can Produce Either 4

question 103

Multiple Choice

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year and a worker in Teeveeland can produce either 2 radios or 5 televisions per year.Each nation has 100 workers,and each country specializes according to the principle of comparative advantage.If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year,then each country's maximum consumption of new radios and televisions per year will be

• A)higher than it would be in the absence of trade because of the gains from trade.
• B)the same as it would be in the absence of trade.
• C)less than it would be in the absence of trade because neither country is specializing in the product in which it has a comparative advantage.
• D)less than it would be in the absence of trade because Teeveeland has an absolute advantage in both goods and so it cannot benefit by trading with Radioland.

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Definitions:

Recall

The mental process of retrieving information from memory without the aid of cues, often tested as a memory function.

Randomly

Without method or conscious decision, in a way that seems unpredictable or without pattern.

Framing Effect

A cognitive bias where people decide on options based on whether they are presented in a positive or negative way.

Risky Strategy

In decision making, opting for an option with potentially higher rewards but also higher risks, often contrasted with a safe or conservative approach.