The Principle of Comparative Advantage States That Specialization Increases Productivity,but

question 21

Multiple Choice

The principle of comparative advantage states that specialization increases productivity,but the principle of increasing opportunity costs states that when you increase production of a single good you must use increasingly costly resources.These two principles

• A) are evidence that economic theory is internally inconsistent.
• B) are an example of the difference between abstract models and the real world.
• C) cannot be true at the same time.
• D) together account for the outward bow shape of production possibility curves.
• E) explain the circular flow of incomE.

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Definitions:

Compensated Surety

A guarantor who receives compensation for guaranteeing the performance or obligations of another party.

Accommodation Surety

A third party who guarantees the debt or obligation of another without benefit to themselves, often to help the borrower obtain a loan.

Guarantor

An individual or entity that agrees to be responsible for another's debt or performance under a contract if the primary party does not meet their obligations.

Guaranty Contract

A legal agreement where a guarantor agrees to fulfill the financial obligations of a debtor to a lender, in case the debtor fails to do so.