Use the Following to Answer Questions

question 8

Multiple Choice

Use the following to answer questions:
Figure: Comparative Advantage
-When countries produce those goods for which they have a comparative advantage:

• A) total production and consumption will increase in all countries.
• B) trade will increase, but production will decrease.
• C) at least one country will be worse off; maximizing production comes from producing those goods for which they have the absolute advantage.
• D) they are maximizing their opportunity costs.

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Definitions:

Optimal Scale

The size of a company or level of production that minimizes costs and maximizes efficiency and profit.

Long-run Equilibrium

A state in which all inputs can be adjusted by firms, market supply meets demand, and no economic profit is earned by firms in a perfectly competitive market.

Long-run Equilibrium

A state in an economy or market where all factors of production and economic variables are balanced, and there are no external pressures forcing change.

MR = MC

The condition under which profit is maximized, where marginal revenue equals marginal cost.