Assume That Chile Can Produce One Pound of Coffee or 40

question 45

Multiple Choice

Assume that Chile can produce one pound of coffee or 40 pillows in an hour,and that the United States can produce one pound of coffee or 20 pillows in an hour,

• A)the terms of trade should be between 20 and 40 pillows per pound of coffee,and the United States should produce both coffee and pillows
• B)the terms of trade should be between 20 and 40 pillows per pound of coffee,and Chile should produce pillows
• C)the terms of trade should be between 20 and 40 pillows per pound of coffee,and Chile should produce coffee
• D)the terms of trade should exceed 40 pillows per pound of coffee,and Chile should produce coffee
• E)no trade will occur,since the United States does not have an absolute advantage in producing either good

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Definitions:

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, with little government intervention.

Redistributing Income

The process of reallocating wealth and income across a society, typically through taxation and government programs, to reduce economic inequality.

Show of Generosity

A display or act where someone gives something or offers help to others without expecting anything in return.

Monetary Profit

Financial gain achieved when the revenue generated from business activities exceeds the expenses, costs, and taxes involved in sustaining the operation.