If Two Countries Engage in Free Trade Following the Principles

question 33

Multiple Choice

If two countries engage in Free Trade following the principles of comparative advantage,then

• A) neither relative prices nor relative marginal costs (marginal rates of transformation-MRTs) in one country will equal those in the other country.
• B) both relative prices and MRTs will become equal in both countries.
• C) relative prices but not MRTs will become equal in both countries.
• D) MRTs but not relative prices will become equal in both countries.
• E) trade will be unrestricted, regardless of relative costs and MRTs.

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