The Law of Comparative Advantage Suggests That

question 192

Multiple Choice

The law of comparative advantage suggests that

• A) individuals, states, and nations can all benefit if they trade with others.
• B) free trade among nations is harmful to an economy.
• C) each economy should strive to be self-sufficient.
• D) each country should attempt to produce roughly equal amounts of all goods.

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Definitions:

Total Utility

The overall satisfaction or benefit a person receives from consuming a particular quantity of goods or services.

Income Effect

The alteration in a person's or an economy's earnings and its effect on the amount of a product or service they seek to purchase.

Law of Demand

The principle that there is an inverse relationship between the price of a good and the amount of it consumers are willing to buy, all else being equal.

Income Effect

How an individual's or an economic system's revenue shift affects the demand level for a particular good or service.