In Order for Mutually Beneficial Trade to Occur Between Two

question 217

Multiple Choice

In order for mutually beneficial trade to occur between two otherwise isolated nations,

• A) each nation must be able to produce at least one good absolutely cheaper than the other.
• B) each nation must be able to produce at least one good relatively cheaper than the other.
• C) each nation must face constant costs in the production of the good it exports.
• D) one nation's production must be labor-intensive, while the other nation's production is capital-intensive.

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Definitions:

Domestic Consumption

The total amount of goods and services consumed within a country's borders.

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount they actually pay.

Producer Surplus

The disparity between the minimum amount producers are prepared to take for a product or service and the higher amount they end up getting.

Blockade

An act of sealing off a place to prevent goods or people from entering or leaving, typically implemented as a form of economic or military pressure.