If Two Countries Agree to Specialize and Trade Based on Comparative

question 32

Multiple Choice

If two countries agree to specialize and trade based on comparative advantage,which of the following is most likely to be true?

• A)Both of the countries will consume outside their respective production possibilities curves.
• B)One of the countries will end up receiving all of the gains from trade.
• C)One of the countries will both consume and produce on its production possibilities curve.
• D)Only one of the countries will produce on and consume outside its production possibilities curve.

---

Definitions:

Intended Third-Party Beneficiaries

Individuals or groups not directly involved in a contract who are nevertheless intended by the contracting parties to benefit from the contract's performance.

Creditor Beneficiaries

Individuals or entities that benefit from a contract made between two other parties, particularly in their capacity to receive a debt payment.

Donee Beneficiaries

Third-party beneficiaries for whom a contract is made to benefit as a gift, giving them the right to enforce the contract against the promisor.

Assigned Donees

Individuals or entities designated to receive specific gifts or donations.