Suppose a Country Abandons a No-Trade Policy in Favor of a Free-Trade

question 134

Multiple Choice

Suppose a country abandons a no-trade policy in favor of a free-trade policy.If,as a result,the domestic price of beans increases to equal the world price of beans,then

• A)that country becomes an exporter of beans.
• B)that country has a comparative advantage in producing beans.
• C)at the world price,the quantity of beans supplied in that country exceeds the quantity of beans demanded in that country.
• D)All of the above are correct.

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Definitions:

Marginal Revenue

The additional income generated from selling one more unit of a product or service.

Lump Sum

A significant amount of money paid all at once, as opposed to smaller payments or installments over time.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent or salaries.

Average Total Costs

The total expenses incurred in the process of producing or offering a good or service, divided by the quantity of goods or services produced or offered.