Suppose That a Worker in Radioland Can Produce Either 4

question 166

Multiple Choice

Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 2 radios or 5 televisions per year. Each nation has 100 workers. If Radioland trades 100 televisions to Teeveeland in exchange for 100 radios each year, what is the impact on each country's maximum consumption of new radios and televisions per year?

• A) higher than it would be in the absence of trade because of the gains from trade
• B) the same as it would be in the absence of trade
• C) less than it would be in the absence of trade because neither country is specializing in the product for which it has a comparative advantage
• D) less than it would be in the absence of trade because Teeveeland has an absolute advantage in both goods and so would lose if it trades with Radioland

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Definitions:

Monopolistically Competitive

A market structure characterized by many sellers offering similar but not identical products, leading to competitive pricing and product differentiation.

Economic Profit

The net financial outcome for a company after all explicit and implicit costs are taken from its overall earnings.

Advertising Goals

The specific objectives set by a business or organization for its advertising campaigns, aimed at promoting products, services, or brand identity.

Monopolistic Competition

A market structure in which many firms sell products that are similar but not identical, allowing for some degree of market power and product differentiation.