Suppose That a Country Has a Comparative Advantage in Agricultural

question 89

Multiple Choice

Suppose that a country has a comparative advantage in agricultural products. When trade occurs, the nominal and real prices of the agricultural good will:

• A) both fall.
• B) both rise.
• C) both remain constant.
• D) The nominal price will fall and the real price will rise.

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Definitions:

Price-Taker Markets

Markets in which individual sellers or buyers have no control over setting prices and must accept the prevailing market price.

Homogeneous Product

Products that are of the same quality and are indistinguishable by buyers.

Competitive Weapon

A unique capability or strategy employed by a company to outperform its competitors.

Barrier To Entry

Elements or circumstances that prevent or hinder the ability of new competitors to enter an industry or market.