Suppose the World Economy Is Composed of Just Two Countries

question 264

Multiple Choice

Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves
For the two countries are shown in the graphs. If Italy and Greece open up trade with each other,
Which of the following terms of trade is mutually beneficial?

• A) 1 ton of chemicals = 1 ton of steel
• B) 2 tons of chemicals = 1 ton of steel
• C) 5 tons of chemicals = 2 tons of steel
• D) 9 tons of chemicals = 5 tons of steel

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Definitions:

Neoclassical Economists

Economists who focus on the determination of goods, outputs, and income distributions in markets through supply and demand.

Economic Behaviors

Actions, decisions, or habits of individuals, groups, or organizations that influence economic outcomes, such as spending, saving, and investing.

Systematic Errors

Errors in measurement or calculations that are consistently repeated and not due to chance variability, often affecting the accuracy of results.

Human Behavior

Human behavior refers to the range of actions and mannerisms exhibited by humans in conjunction with their environment, social structures, and culture.