Suppose There Are Two Countries,Freedonia and Sylvania,which Have Identical Amounts

question 95

Multiple Choice

Suppose there are two countries,Freedonia and Sylvania,which have identical amounts of resources,identical technologies,and identical populations.Both produce two types of goods,consumer goods and capital goods,and they both always operate on their production possibilities frontiers.The only difference is that this year Sylvania chooses to produce relatively more capital goods than Freedonia.What will happen as a result

• A)Freedonia will have a lower living standard this year and will grow slower than Sylvania.
• B)Freedonia will have a lower living standard this year but will grow faster than Sylvania.
• C)Sylvania will have a lower living standard this year and will grow slower than Freedonia.
• D)Sylvania will have a lower living standard this year but will grow faster than Freedonia.

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Definitions:

Import Quotas

Import quotas are government-imposed limits on the quantity or value of goods that can be imported into a country, used to protect domestic industries and regulate international trade.

Tariffs

Taxes imposed by a government on imported goods, often to protect domestic industries from foreign competition.

Opportunity Cost

The cost of foregone alternatives when a choice is made, representing the benefits that could have been received by taking an alternative action.

Comparative Advantage

The ability of a country, individual, company, or region to produce a good or service at a lower opportunity cost than its competitors.