Exhibit 28-2 Karl Can Produce Either 10 Tons of Oranges

question 62

Multiple Choice

Exhibit 28-2 Karl can produce either 10 tons of oranges or 5 tons of apples in a year,while Adam can produce either 5 tons of oranges or 10 tons of apples.
Refer to Exhibit 28-2.If the exchange rate between apples and oranges in international markets is 1 ton of oranges per 3 tons of apples:

• A) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries.
• B) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export apples to other countries.
• C) Karl and Adam will trade apples and oranges with one another.
• D) Karl and Adam will not specialize or engage in international trade.

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