Figure 3-2 -Refer to Figure 3-2. What Do the Two Producers Have

question 9

Multiple Choice

Figure 3-2
-Refer to Figure 3-2. What do the two producers have an absolute or comparative advantage in?

• A) Paul has a comparative advantage in both wheat and corn.
• B) Paul has an absolute advantage in wheat, and Cliff has a comparative advantage in corn.
• C) Cliff has a comparative advantage in wheat, and Paul has a comparative advantage in corn.
• D) Cliff has a comparative advantage in both wheat and corn.

Gain knowledge of the scale and significance of international trade for various countries.

Appreciate the benefits of international trade to economies, including the concept of consuming beyond domestic production possibilities.

Understand the balance of trade and the concept of trade deficits.

Recognize leading exports and imports of the United States and other countries, and the importance of service exports.

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Definitions:

Long-Run Equilibrium

A state in which all firms in an industry are producing at their minimum long-run average cost and are earning normal profits.

Units of Output

The measurable amount of goods or services produced by a company or industry.

Internal Economies of Scale

cost advantages that a firm obtains due to expansion, leading to a decrease in the average cost per unit.

Plant

A facility where goods are produced or processed, also referring to the physical capital in production.