When Nations Specialize According to Their Comparative Advantage

question 65

Multiple Choice

When nations specialize according to their comparative advantage:

• A) total world production rises but total consumption in the world declines.
• B) total production and consumption in the world increase.
• C) consumption rises in one country but must fall in all others.
• D) None of these happen.

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Definitions:

Market

A forum where buyers and sellers come together to exchange goods, services, or information.

Goods and Services

Goods and services encompass all the physical items and intangible benefits that are produced and consumed to satisfy human wants and needs.

Factors of Production

Factors of production are the inputs used in the production of goods or services in the attempt to make an economic profit, including labor, capital, land, and entrepreneurship.

Circular-Flow Model

The circular-flow model is an economic diagram that illustrates how households and firms interact through markets for products and resources, depicting the continuous flow of money and resources.