Suppose That Country a Is Twice as Good at Producing

question 79

Multiple Choice

Suppose that country A is twice as good at producing widgets as country B. If the currency of B is twice as valuable as the currency of A,

• A) the comparative advantage will be canceled out.
• B) trade will be an improved outcome for both A and B.
• C) the comparative advantage could possible be canceled out depending on how much it costs to produce the widget in country B.
• D) none of the above

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Definitions:

Marginal Product

Marginal Product is the additional output resulting from a one-unit increase in the quantity of one input while holding all other inputs constant.

Marginal Revenue Product

The additional revenue generated from utilizing one more unit of an input, such as labor or capital, in the production process.

Monopolist

A singular entity that is the only provider of a particular product or service in the market, controlling the market and potentially manipulating prices and output.

Demand Elasticity

The measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating its sensitivity to price changes.