Consider a World with Two Countries and Two Goods

question 227

Multiple Choice

Consider a world with two countries and two goods. Under which of the following conditions does comparative advantage NOT exist?

• A) One country can produce both goods more cheaply than the other country.
• B) One country has more productive resources or inputs than another country.
• C) The opportunity cost of producing each good is the same in each country.
• D) One country has an absolute advantage in producing one good while the other country has an absolute advantage in producing the other good.

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Definitions:

Socially Desirable

Actions or policies that are beneficial for society as a whole, often considering long-term benefits over short-term gains.

Producer Surplus

The difference between the amount that producers are willing to sell a good for and the actual amount received by them after selling it.

Price Floor

A government-imposed minimum price charged for a product, above which market transactions may legally occur.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, naturally established in a free market.