Suppose That a Worker in Cornland Can Grow Either 40

question 35

Multiple Choice

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 20 bushels of corn or 5 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. Which of the following statements is correct?

• A)Both countries could gain from trade with each other.
• B)Neither country would gain from trade because Cornland has an absolute advantage in both goods.
• C)Neither country would gain from trade because neither one has a comparative advantage.
• D)Only Oatland could possibly gain from trade.

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Definitions:

Market Structure

Refers to the organization and characteristics of a market, including the degree of competition, number of firms, and the distribution of market shares.

Large Firm

A business entity characterized by a large scale of operations, potentially including extensive product lines, significant market share, or substantial workforce.

Profit Maximizing Price

The price at which a firm can generate the highest possible profit, determined by the intersection of the firm's supply curve and the market demand curve.

Profit Maximizing

The process of finding the level of output where a firm achieves the maximum possible profit.