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:

Competent Regarding

Having the necessary ability, knowledge, or skill in a specific area or subject.

Client Interviews

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