A Country Engaging in Trade According to the Principles of Comparative

question 3

Multiple Choice

A country engaging in trade according to the principles of comparative advantage gains from trade because it

• A) is producing exports indirectly more efficiently than it could alternatively.
• B) is producing imports indirectly more efficiently than it could domestically.
• C) is producing exports using fewer labor units.
• D) is producing imports indirectly using fewer labor units.
• E) is producing exports while outsourcing services.

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Definitions:

Output Effect

The impact on total production or output when a firm alters the level of inputs, holding all other factors constant.

Substitutable Resources

Resources that can replace each other in production or consumption, such that the increase in price of one leads to an increase in demand for the other.

Productivity

The measure of efficiency in producing goods and services, typically quantified as the ratio of output to input in the production process.

Lumber

Processed wood used for building and construction.