​James Has a Comparative Advantage in the Production of Corn

question 69

Multiple Choice

​James has a comparative advantage in the production of corn, while Harry has a comparative advantage in the production of bread. If James and Harry decide to trade with each other, _____.

• A)both Harry and James will enjoy gains from trade
• B)only Harry will enjoy gains from trade
• C)only Harry will suffer losses from trade
• D)​only James will suffer loses from trade
• E)neither of them will gain from trade

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Definitions:

Linear Marginal Cost

A situation where the additional cost of producing one more unit of output is constant, regardless of the quantity produced.

Sunk Costs

Expenses that have already been incurred and cannot be recovered or refunded.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and insurance.

Explicit Costs

Input costs that require an outlay of money by the firm