-Refer to the Above Diagrams

question 101

Multiple Choice

-Refer to the above diagrams.The solid lines are production possibilities curves;the dashed lines are trading possibilities curves.The trading possibilities curves imply that:

• A) both countries are experiencing an excess of exports over imports which results in economic growth.
• B) the domestic production possibilities curves entail unemployment and/or the domestic misallocation of resources.
• C) world resources will be allocated more efficiently if the two nations specialize and trade in accordance with comparative advantage.
• D) both nations will be worse off as a result of international specialization and trade.

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