In Zombia,it Takes 10 Resources to Produce 1 Ton of Cocoa

question 58

Multiple Choice

In Zombia,it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice.In South Curmudgea,it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice.Zombia has a comparative advantage over South Curmedgea in cocoa.This follows the theory of comparative advantage,and we can say that engaging in free trade benefits all countries that participate in it.Which of the following is an inaccurate assumption on which this conclusion is based?

• A)We have assumed constant returns to scale.
• B)We have assumed the prices of resources and exchange rates in the two countries are dynamic.
• C)We have assumed there are barriers to the movement of resources from the production of one good to another within the same country.
• D)We have assumed that agrarian nations do not specialize in producing fertilizers.
• E)We have assumed diminishing returns to specialization.

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