When Opportunity Costs Are Identical Between Two Countries for All

question 115

Multiple Choice

When opportunity costs are identical between two countries for all goods,

• A)there can be no gains from trade unless there are economies of scale in some of the products.
• B)international trade will be advantageous only to the country that has an absolute advantage in the production of some commodity.
• C)there will be gains from trade for both countries if one country has an absolute advantage in the production of some commodity.
• D)absolute advantages will determine the gains from trade.
• E)there will be absolute advantages from trade but no comparative advantages from trade.

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Definitions:

External Failure Cost

Costs incurred when a defective product or service is discovered after delivery to the customer, including returns, repairs, and lost sales.

Prevention Costs

Costs incurred to prevent defective units before they are produced. For example, reengineering products or production processes.

Appraisal Costs

Costs associated with the evaluation and inspection of products or services to ensure they meet quality standards.

Internal Failure Costs

Costs incurred when a defect is discovered before being received by a customer.