Suppose the US and Mexico Both Produce Semiconductors and Auto

question 21

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.If the US exports semiconductors to Mexico and imports auto parts from Mexico,

• A) both countries, as a whole, will be better off.
• B) all individuals in both countries will be better off.
• C) both countries, as a whole, will be worse off.
• D) all individuals in both countries will be worse off.

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Definitions:

Competitive Markets

Markets characterized by a large number of buyers and sellers, where no single entity controls the market prices.

Resource

Any physical or virtual entity of limited availability that needs to be consumed to obtain a benefit, including natural resources, human resources, and financial resources.

Interest Rate

It represents the cost of borrowing money or the reward for saving, crucial for personal finance and economic policy decisions.