-Suppose the Production Possibilities for Two Countries,producing Either Food or Clothing,are

question 37

Multiple Choice

-Suppose the production possibilities for two countries,producing either food or clothing,are shown in the above figure.They can each produce any linear combination as well.Suppose each country is in competitive equilibrium prior to free trade being allowed.Once free trade is allowed,the price of food will be

• A) two times the price of clothing.
• B) equal to the price of clothing.
• C) one-half the price of clothing.
• D) somewhere between one-half the price of clothing and the price of clothing, depending upon the relative bargaining power of the two countries.

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Definitions:

Poverty

A socio-economic condition characterized by a lack of access to essential resources, services, and opportunities necessary for a minimum standard of living.

Capital Accumulation

The process of acquiring and investing capital in order to increase the wealth or productive capacity of an economy.

Saving

The act of setting aside money for future use, rather than spending it immediately, typically to achieve a financial goal or prepare for emergencies.

Domestic Output

The total value of all goods and services produced within a country's borders within a given time period.