Suppose the World Economy Is Composed of Just Two Countries

question 24

Multiple Choice

Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs below. Refer to the graphs and information above. The assumption made about the domestic production opportunity costs in both countries is that they are:

• A) Constant
• B) Variable
• C) Increasing
• D) Decreasing

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