Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because
A. One country has an absolute advantage in the production of both goods, thus providing that country with no incentive for trade.
B. The opportunity costs for both countries are the same.
C. One country has a comparative advantage in the production of both goods, thus providing that country with no incentive for trade.
D. An intersection of the two lines is not possible, and therefore a trade equilibrium is not possible.
Answer: B
You might also like to view...
Moving along the short-run aggregate supply curve, ________
A) the real wage rate is constant B) real GDP equals potential GDP C) the money wage rate, the prices of other resources, and potential GDP remain constant D) real GDP equals nominal GDP
Upon learning that his auto transmission is about to fail, Ray Roma sells his car to an unsuspecting buyer. This circumstance illustrates the:
A. adverse selection problem. B. free-rider problem. C. moral hazard problem. D. principal-agent problem.