If a Country Specializes in Goods That It Can Produce

question 90

Multiple Choice

If a country specializes in goods that it can produce most readily and cheaply and trades those goods for the goods that another country can produce most readily and cheaply, then both countries are exercising which of the following principles?

• A) distinctive advantage
• B) comparative advantage
• C) absolute advantage
• D) parallel competencies

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Definitions:

Consumer Surplus

The difference between what consumers are willing to pay for a good or service versus what they actually pay.

Consumer Surplus

The distinction between the ideal payment consumers are willing to make for a product or service and the real cost they incur.

Equilibrium Price

The price at which the quantity of goods demanded by consumers equals the quantity of goods supplied by producers, leading to market balance.

Price Elasticity

The degree to which the demand or supply of a product changes in response to a change in price.