Table 3-37 Assume That Aruba and Iceland Can Switch Between Producing Coolers

question 464

Multiple Choice

Table 3-37
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
-Refer to Table 3-37. Aruba should export

• A)coolers and import radios.
• B)radios and import coolers.
• C)both goods and import neither good.
• D)neither good and import both goods.

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Definitions:

World Production

The total output of goods and services produced by all countries around the globe.

Autarky

A situation in which a country does not trade with other countries.

Comparative Advantage

The advantage conferred on an individual or country in producing a good or service if the opportunity cost of producing the good or service is lower for that individual or country than for other producers.

Absolute Advantage

The advantage conferred on an individual or country in an activity if the individual or country can do it better than others. A country with an absolute advantage can produce more output per worker than other countries.