Suppose an American Worker Can Make 20 Pairs of Shoes

question 29

Multiple Choice

Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. When trade opens up, the United States should produce _____ because it has a(n) _____ and should _____.

• A) both goods; absolute advantage in both goods; not trade
• B) only shoes; comparative advantage at producing shoes; trade for apples.
• C) only apples; comparative advantage at producing apples; not trade
• D) only apples; comparative advantage at producing apples; trade for shoes.

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Definitions:

Macroeconomics

A branch of economics dealing with the structure, performance, behavior, and decision-making of an economy as a whole, rather than individual markets.

Marginal Products

The additional output that is produced as a result of adding one more unit of a particular input while holding other inputs constant.

Low-productivity Workers

Refers to employees who have below-average output per unit of input, often due to lack of skills, motivation, or resources.

Adverse Selection

A situation where sellers have information that buyers do not have, or vice versa, often leading to an inefficient market outcome.