Suppose That a Worker in Radioland Can Produce Either 4

question 61

Multiple Choice

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 5 televisions per year. Each nation has 100 workers. If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year, what is the impact on each country's maximum consumption of new radios and televisions per year?

• A)Higher than it would be in the absence of trade because of the gains from trade.
• B)The same as it would be in the absence of trade.
• C)Less than it would be in the absence of trade because neither country is specializing in the product for which it has a comparative advantage.
• D)Less than it would be in the absence of trade because Teeveeland has an absolute advantage in both goods and so would lose if it trades with Radioland.

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Definitions:

Study

The act of devoting time and attention to acquiring knowledge on an academic subject, particularly by means of books.

Insulin

A hormone produced by the pancreas that regulates blood glucose levels by facilitating the uptake of glucose into tissues.

Extract Glucose

The process of isolating glucose, a simple sugar and important energy source, from various sources in biochemical applications or physiological processes.

Homeostasis

The self-regulating process by which biological systems tend to maintain stability while adjusting to conditions for optimal survival.