(Table) Macrostan and Econostan Are Neighboring Countries with Populations of About

question 110

Multiple Choice

(Table) Macrostan and Econostan are neighboring countries with populations of about 10 million people each and land area of 30 to 31 million square miles each. The table shows total output of cheese and wool if each country splits its resources evenly toward the production of both products. Who is likely to be the exporter of each product if voluntary trade is based on comparative advantage?

• A) Macrostan will export both cheese and wool.
• B) Macrostan will export cheese and Econostan will export wool.
• C) Macrostan will export wool and Econostan will export cheese.
• D) Econostan will export both cheese and wool.

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Definitions:

Skilled Labor

Workers who have specialized training, education, or experience that is valuable for specific jobs, industries, or tasks.

Unskilled Labor

Workforce sector comprising individuals without specialized training or qualifications, often employed in tasks that require manual efforts.

Marginal Productivity

The additional output that is produced by employing one more unit of a factor of production, holding all other factors constant.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor of production.