The Following Table Indicates the Production Possibilities of Food and Clothing

question 85

Multiple Choice

The following table indicates the production possibilities of food and clothing per worker day in the United States and South Korea. Which of the following is true?

• A) Mutual gains from trade could be realized if the United States specialized in clothing production and South Korea in production of food.
• B) South Korean workers are the low-cost producers of clothing.
• C) Mutual gains could be realized if the United States specialized in producing food and South Korea in producing clothing.
• D) U.S. workers are the high-cost producers of clothing.

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Definitions:

Indifference Curves

Graphical representations showing combinations of goods or services that provide the same level of satisfaction to a consumer.

Ordinary Goods

In a consumer’s utility function, those for which additional units of one good are required to compensate for fewer units of another, and vice versa; and for which the consumer experiences a diminishing marginal rate of substitution when substituting one good in place of another.

Marginal Rate

The rate at which one variable changes over the change in another variable, often used in the context of taxes or marginal rate of substitution in economics.

Substitution

The economic concept whereby consumers replace costlier items with less expensive alternatives, or firms switch between inputs to minimize costs.