If Country a Can Produce an Extra Plane by Giving

question 277

Multiple Choice

If Country A can produce an extra plane by giving up two boats,and Country B can produce an extra plane by giving up three boats,then

• A) Country A has a comparative advantage over Country B in the production of planes.
• B) Country B has a comparative advantage over Country A in the production of planes.
• C) the two countries have no incentive to trade with one another.
• D) Country A would like to trade with B, but B cannot gain by trading with A.
• E) Country A has an absolute advantage in producing planes and a comparative advantage in producing boats.

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Definitions:

Off Season

A period of the year when a particular activity, typically related to tourism or agriculture, is at its lowest level of demand.

Average Variable Cost

The variable cost per unit of output, calculated by dividing total variable costs by the quantity of output produced.

Perfectly Competitive

Describes a market structure where numerous small firms compete against each other, and no single entity has market power to set the price of a homogeneous product.

Market Price

The price at which a good or service is offered in the marketplace, determined by supply and demand forces.