How Can a Domestic Producer Determine Whether or Not It

question 213

Multiple Choice

How can a domestic producer determine whether or not it has a comparative advantage in the production of a good or service?

• A) It cannot.
• B) by comparing the price it receives to the prices of other domestic producers
• C) by comparing the price it receives to the world price
• D) by comparing the quantity it produces to the quantity produced in the world
• E) by comparing the total domestic quantity to the total world quantity

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Definitions:

Hicks Version

Refers to a model or approach in economics that elaborates on how consumer demand for goods is affected by changes in income and substitution effects.

Income and Substitution Effects

The changes in consumer behavior resulting from changes in relative prices and purchasing power, affecting choices between goods.

Utility Function

A mathematical representation of how a series of choices provides different levels of happiness or satisfaction to an individual or entity.

Budget Constraint

An economic model that represents all the combinations of goods and services that a consumer can afford, given their income and prices of goods.