Below Is Production Possibilities Data for the Countries of Mental

question 82

Multiple Choice

Below is production possibilities data for the countries of Mental and Etheric.

-Refer to the information above to answer this question.Suppose that each country was producing combination D before trade but then specializes in the product in which it has a comparative advantage.What would be the total gains from trade?

• A)40 million units of rice cakes.
• B)100 million units of rice cakes.
• C)60 million units of soya milk and 40 million units of rice cakes.
• D)40 million units of soya milk and 60 million units of rice cakes.
• E)20 million units of soya milk.

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Definitions:

Economies of Scope

Cost advantages that a business experiences by producing a wider variety of products, rather than specializing in the production or provision of a single product or service.

Diseconomies of Scale

A point at which a company grows so large that the costs per unit increase with the increase in production.

Experience Curve Effects

The reduction in unit costs of production as output increases, typically due to gained efficiencies and learning over time.

Regression Analysis

A statistical method used to examine the relationship between a dependent variable and one or more independent variables.