If Trade Opens Up Between the Two Formerly Autarkic Countries

question 2

Multiple Choice

If trade opens up between the two formerly autarkic countries, Australia and Belgium, then

• A) the real income of both countries will increase.
• B) the real income of neither country will increase.
• C) the real income of Australia but not of Belgium will increase.
• D) the real income of Australia and of Belgium will increase.
• E) the real income of both countries may increase.

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Definitions:

Marginal Utility

The increased happiness or usefulness gained by consuming an additional unit of a good or service.

Total Utility

The total satisfaction received from consuming a particular quantity of a good or service.

Utility Schedule

A table showing different quantities of a good and the utility or satisfaction derived from each quantity, used to analyze consumer preferences.

Marginal Utility

Additional enjoyment or value experienced from consuming an extra unit of a good or service.