Suppose the US and Mexico Both Produce Semiconductors and Auto

question 80

Multiple Choice

Suppose the US and Mexico both produce semiconductors and auto parts and the US has a comparative advantage in semiconductors while Mexico has a comparative advantage in auto parts.Also suppose the US has an absolute advantage in the production of both semiconductors and auto parts.The US should

• A) not trade semiconductors and auto parts with Mexico.
• B) import semiconductors from Mexico and export auto parts to Mexico.
• C) export semiconductors to Mexico and import auto parts from Mexico.
• D) export both semiconductors and auto parts to Mexico.

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Definitions:

Efficiency Loss

Economic costs that arise when market equilibrium is not achieved, or when resources are not allocated optimally, leading to waste or suboptimal outcomes.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is not achievable.

Marginal Cost

The extra expense associated with manufacturing an additional unit of a product or service.

Maximum Willingness

Describes the highest amount a consumer is willing to pay for a good or service, reflecting the maximum value they derive from it.