The Terms of Trade

question 42

Multiple Choice

The terms of trade

• A)equal the equilibrium price in a competitive market
• B)equal a nation's imports minus its exports
• C)determine whether specialization according to comparative advantage is economically rational
• D)are equal to 1.0 in market equilibrium
• E)determine how the gains from international trade are distributed among countries

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Definitions:

Long-Run Supply Function

A relationship indicating the quantity of a good or service that producers are willing to make available in the market over a long period, considering all inputs are variable.

Long-Run Total Cost

The sum of all costs incurred by a firm in the production of goods or services when all inputs are considered variable in the long term.

Profit Maximization

The process of determining the best output and pricing levels to achieve the most profit.

Production Function

An equation in mathematics that outlines how inputs correlate with the greatest output achievable from those inputs.