"The Equilibrium Relative Commodity Price at Which Trade Takes Place

question 49

Multiple Choice

"The equilibrium relative commodity price at which trade takes place is determined by the conditions of demand and supply for each commodity in both nations.Other things being equal, the nation with the more intense demand for the other nation's exported good will gain less from trade than the nation with the less intense demand." This statement was first proposed by

• A) Alfred Marshall with offer curve analysis.
• B) John Stuart Mill with the theory of reciprocal demand.
• C) Adam Smith with the theory of absolute advantage.
• D) David Ricardo with the theory of comparative advantage.

---

Definitions:

Firm

A business organization, such as a corporation, partnership, or sole proprietorship, engaged in commercial, industrial, or professional activities.

Profit

An excess of sales revenue relative to the opportunity cost of production. The cost component includes the opportunity cost of all resources, including those owned by the firm. Therefore, profit accrues only when the value of the good produced is greater than the value of the resources used for its production.

Loss

A deficit of sales revenue relative to the opportunity cost of production. Losses are a penalty imposed on those who produce goods even though they are valued less than the resources required for their production.

Maximum Daily Profit

The highest possible profit a business can achieve in a single day based on its operational and financial constraints.