Refer to the Data Below

question 56

Multiple Choice

Refer to the data below. Assume that before specialization and trade Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage, the gains from specialization and trade will be: Production possibilities data for Gamma and Sigma. All data are in tons.
Gamma production possibilities: Sigma production possibilities:

• A) 40 tons of pots.
• B) 20 tons of tea and 20 tons of pots.
• C) 20 tons of tea.
• D) 40 tons of tea.

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Definitions:

Competitive Firm

A business entity in a market where numerous sellers compete to sell their goods or services, implying no single seller controls the market prices.

Downward Sloping Demand

The economic principle that, all else being equal, demand for a good or service decreases as its price increases.

Total Revenue

The overall income generated by a business from the sale of goods or services before any costs or expenses are subtracted.

Competitive Market

A market structure characterized by a large number of buyers and sellers, where each participant has negligible influence on the price, leading to efficient outcomes where price equals marginal cost.