Nation Alpha Has a Comparative Advantage in Product X, and Nation

question 74

Multiple Choice

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y. Trade in the two products will only benefit the two nations if

• A) the exchange ratio of X for Y is fixed.
• B) the terms of trade increase in both nations.
• C) there is excess capacity in both economies.
• D) the prices charged for X and Y reflect their domestic opportunity costs.

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Definitions:

Umbilical Cord

A tube that connects the fetus to the placenta.

Phenotype

The actual form or constitution of a person as determined by heredity and environmental factors.

Genotype

The genetic makeup of an organism, consisting of the inherited alleles, that determines its specific traits.

Environmental Influences

External factors, such as climate, geographical location, and social context, that affect living organisms and their development.