Countries a and B Currently Consume 400 Units of Food

question 31

Multiple Choice

Countries A and B currently consume 400 units of food and 400 units of textiles each and currently do not trade with one another.The citizens of country A have to give up one unit of food to gain two units of textiles,while the citizens of country B have to give up one unit of textiles to gain two units of food.Their production possibilities curves are shown. Under the theory of comparative advantage

• A)The citizens of country A should make food and trade with the citizens of country B for textiles.
• B)The citizens of country A should make textiles and trade with the citizens of country B for food.
• C)There are no gains from trade in this example.
• D)A is twice as good as B at making food and B is twice as good as A at making textiles.

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Definitions:

Proposition

A statement or assertion that expresses a judgment or opinion which is either true or false.

Venn Diagram

A diagram that uses circles to represent the relationships among different sets, highlighting commonalities and differences.

Proposition

An observation that signals a judgment or perspective.

Venn Diagram

A diagram that uses circles to represent sets and their relationships, including intersections, unions, and complements, often used in logic and set theory.