Assume There Is No Trade Between Lizland and Kitland

question 42

Multiple Choice

Assume there is no trade between Lizland and Kitland. The price of a toothbrush is $1 in Lizland and $3 in Kitland. The price of a candy bar is $2 in Lizland and $2.50 in Kitland. If trade opens up between the two countries, which of these is the likely result?

• A) A toothbrush sells for $1.50 and a candy bar sells for $2.50 in both countries, with Kitland as the importer of candy bars and both as the exporters of toothbrushes.
• B) A toothbrush sells for $2 and a candy bar sells for $2.25 in both countries, with Lizland as the exporter of candy bars and Kitland as the exporter of toothbrushes.
• C) A toothbrush sells for $2 and a candy bar sells for $2.25 in both countries, with Lizland as the importer of candy bars and Kitland as the importer of toothbrushes.
• D) A toothbrush sells for $2.25 and a candy bar sells for $1.75 in both countries, with Lizland as the importer of toothbrushes and Kitland as the importer of candy bars.

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Definitions:

Income Redistribution

Economic policies or mechanisms designed to transfer income and wealth from certain individuals or groups to others to achieve social or economic objectives.

Total Utility

The total satisfaction or benefit received by consuming a certain amount of a good or service.

Female Poverty Rate

The percentage of females living below the poverty line in a given region.

Male Poverty Rate

The proportion of the male population living below the poverty line, measured by the income level considered necessary for basic living standards in a given country or area.