Assume That Initially Country a Exchanges Three Barrels of Oil

question 56

Multiple Choice

Assume that initially country A exchanges three barrels of oil for one ton of steel from country B. Later the arrangement changes to four barrels of oil for one ton of steel. This indicates that:

• A) the terms of trade for country B have improved.
• B) country A has a comparative advantage in the production of steel.
• C) the relative price of steel in terms of oil has fallen.
• D) the terms of trade for country A have improved.
• E) country B has an absolute advantage in the production of oil.

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