If the World Terms of Trade for a Country Are

question 38

Multiple Choice

If the world terms of trade for a country are somewhere between the domestic cost ratio of H and that of F,then

• A) country H but not country F will gain from trade.
• B) country H and country F will both gain from trade.
• C) neither country H nor F will gain from trade.
• D) only the country whose government subsidizes its exports will gain.
• E) country F but not country H will gain from trade.

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Definitions:

Separating Equilibrium

Separating equilibrium occurs in a game or market when different types of participants choose distinctly different strategies or products, revealing their type.

Pooling Equilibrium

A situation in a market where all agents, regardless of their type or quality, provide the same signal, making it impossible to distinguish between them based on that signal alone.

Microeconomics

The branch of economics that studies individual agents and markets, decision-making processes, and the outcomes of interactions.

Wage Cut

A reduction in the rate of pay received by workers.