Suppose the U.S. can produce 10 units of food and five units of clothing (or any linear combination) and Canada can produce six units of food and three units of clothing (or any linear combination)
What type of trade will occur between these two countries? Explain.
In both countries, two units of food must be sacrificed to produce a unit of clothing. Since each country has the same MRT, there are no gains from trade to be made.
You might also like to view...
Which of the following statements about a non-discriminating monopoly firm is correct?
a. It charges a price greater than its marginal cost. b. Its high prices generate inflation. c. It charges a price that maximizes its total revenues. d. As a price setter, it can ignore market demand. e. It has no incentive to produce each output level at the lowest possible cost.
The marginal propensity to consume:
A. is the amount by which consumption increases when after-tax income increases by $1. B. is closely linked to the multiplier effect of government spending. C. is a value between 0 and 1. D. All of these are true.