Refer to the Figure Shown, Which Represents the Production Possibilities

question 82

Multiple Choice

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B After examining the production possibilities of each country, we can surmise that Country A's opportunity cost of a car:

• A) is lower than that of Country B, and so they should specialize in cars and trade.
• B) is higher than that of Country B, and so they should specialize in cars and trade.
• C) is the same as that of Country B, and so they will not benefit from trade.
• D) does not determine a country's decision to trade; it is absolute advantage that drives that decision.

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Definitions:

Decision Lag

The time taken between identifying an economic issue and the implementation of policy to address it.

Progressive

In the context of taxation, it refers to a tax system where the tax rate increases as the taxable amount increases, often aimed at reducing income inequality.

National Debt

The total amount of money that a country's government has borrowed, through various means, and has yet to repay.

Recognition Lag

Recognition Lag is the time it takes for policymakers to identify an economic problem.