Suppose That a Worker in Radioland Can Produce Either 4

question 112

Multiple Choice

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year,and a worker in Teeveeland can produce either 2 radios or 5 televisions per year.Each nation has 100 workers,and each country specializes according to the principle of comparative advantage.If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year,then each country's maximum consumption of new radios and televisions per year will be

• A)higher than it would be in the absence of trade because of the gains from trade.
• B)the same as it would be in the absence of trade.
• C)less than it would be in the absence of trade because neither country is specializing in the product for which it has a comparative advantage.
• D)less than it would be in the absence of trade because Teeveeland has an absolute advantage in both goods and so it cannot benefit by trading with Radioland.

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Definitions:

Operating Expenses

Regular expenses incurred in the day-to-day functioning of a business, excluding the cost of goods sold.

Sales Revenues

The income earned from selling goods or services before any costs or expenses are deducted.

Internal Rate of Return

A metric used in capital budgeting to estimate the profitability of potential investments, calculated as the rate of return that makes the net present value of all cash flows from a particular project equal to zero.

Automated Molding

The use of machines and technology to create molds for producing parts or products with minimal human intervention.