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Scenario: the Price of a Given Basket of Goods in Country

question 62

Multiple Choice

Scenario: The price of a given basket of goods in Country 1 is 10 karls. The price of the same basket of goods in Country 2 is 25 ritz and is $2 in the United States. Country 1 has an income per capita of 3,200 karls, and Country 2 has an income per capita of 5,500 ritz.
-Refer to the scenario above.Which of the following is true?


Definitions:

Autarky

National self-sufficiency; no economic interaction with foreigners.

Opportunity Cost

The value of the best alternative that is forgone in making any choice or decision.

Terms of Trade

The ratio between a country's export prices and its import prices, indicating the quantity of imports goods a country can purchase through the sale of its exports.

Supply and Demand

Fundamental economic model describing how prices vary as a result of a balance between product availability and consumers' purchasing desires.

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