Home Has a Comparative Advantage in Wheat, and Foreign Has

question 75

Multiple Choice

Home has a comparative advantage in wheat, and Foreign has a comparative advantage in cloth. Once trade occurs, Home produces 1,500 bushels of wheat, and Foreign produces 1,000 yards of cloth. The following table shows the amount of wheat that Home is willing to trade to acquire more cloth. Suppose that Home's trade price rose from 0.5 bushel of wheat per yard of cloth in 2009 to a bushel of wheat per yard of cloth in 2010. What does this movement represent in terms of Home's terms of trade?

• A) It is an improvement in Home's terms of trade.
• B) It is a deterioration in Home's terms of trade.
• C) There is no change in Home's terms of trade.
• D) The answer cannot be determined based on the information provided.

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Definitions:

Consideration

Something of value given by both parties to a contract that induces them to enter into the agreement.

Restitution

An act of restoring or paying compensation for loss or damage to the original state or owner.

Tort Of Defamation

The tort of defamation involves making false statements about another person that cause harm to their reputation.

Unenforceable

A term applied to a contract that, because of a law, cannot be enforced by the courts.