If Countries a and B Produce Only Either Rubber Bands

question 107

Multiple Choice

If Countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the production possibilities schedules below: In country A the opportunity cost of 1 paper clip is:

• A) 2 rubber bands
• B) 1 rubber band
• C) 1/2 rubber band
• D) 1/4 rubber band

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Definitions:

Comparative Advantage

The ability of a party to produce a particular good or service at a lower marginal and opportunity cost than another party.

Cakes

Baked goods that are typically sweet, often layered or decorated, and are usually served on special occasions like birthdays or weddings.

Absolute Advantage

A concept in international trade that occurs when one country can produce a good or service more efficiently than another country, using the same amount of resources.

Wheat

A cereal grain that is cultivated worldwide and serves as a staple food for a large portion of the world's population.