Below Is Some Hypothetical Data for the Countries of Canada

question 155

Multiple Choice

Below is some hypothetical data for the countries of Canada and Mexico.(Assume that Canada has 10 million workers per month available and Mexico has 20 million. )
Canada's Production Possibilities
(Output in millions of bushels per month)
Mexico's Production Possibilities
(Output in millions of bushels per month)
Output Before Trade
(Output in millions of bushels per month)

-Suppose that a country has a comparative advantage in the production of wheat.Which of the following statements is true?

• A)It must also have an absolute advantage in the production of wheat.
• B)The purchasing power parity theory must also be in its favour.
• C)Specialization is wise only up to a point because of the law of increasing costs.
• D)Specialization is wise only if exchange rates are fixed.

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