When the Principle of Comparative Advantage Determines Trade, Then a Country

question 197

Multiple Choice

When the principle of comparative advantage determines trade, then a country will

• A) specialize only in that good with the highest opportunity cost.
• B) specialize only in goods with the lowest opportunity costs.
• C) specialize only in that good where output is less per worker hour than another country.
• D) specialize only in that good where production costs are more than average total costs.

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Definitions:

Substitution Effect

Refers to consumers’ ability to substitute other products for the focal brand, thus increasing the price elasticity of demand for the focal brand.

Cross-Price Elasticity

A measure of how the demand for one product changes in response to a price change of another product.

Toothpaste

A gel or paste used with a toothbrush to clean and maintain the aesthetics and health of teeth, often containing fluoride to prevent dental cavities.

Complementary Product

A product that adds value to another product when used together, enhancing the overall user experience.