Suppose That Argentina and Chile Are Both Engaged in the Production

question 156

Multiple Choice

Suppose that Argentina and Chile are both engaged in the production of copper and wheat, and that Argentina has an absolute advantage in the production of both goods. If Chile has a comparative advantage in the production of copper, then Chile

• A) has a lower opportunity cost for copper, which means that it should specialize in production of copper and engage in trade.
• B) has a lower opportunity cost for producing copper, but specialization is not feasible because Argentina has a lower monetary cost of copper production.
• C) has a higher opportunity cost for copper, which means it should specialize in the production of wheat and engage in trade.
• D) should continue to produce copper, but only for domestic consumption, because trade is not a viable option.

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Definitions:

Production

The procedure involved in producing goods and services.

Federal Budget Deficit

The federal budget deficit occurs when the government's expenditures exceed its revenues in a given fiscal year, leading to borrowing or use of reserves.

Sherman Antitrust Act

A United States antitrust law that outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade.

Monopolies

Market structures characterized by a single seller who has exclusive control over the supply of a good or service, often leading to higher prices and reduced competition.