The table below shows the number of labor hours required to produce one umbrella and one bushel of corn in the United Kingdom and the rest of the world. Which of the following statements is true? Labor hours to make:In the United KingdomIn the Rest of the World1 umbrella3.002.001 bushel of corn1.000.25
A. The United Kingdom has a comparative advantage in the production of corn.
B. The United Kingdom has a comparative advantage in the production of umbrellas.
C. The United Kingdom has a comparative advantage in the production of both goods.
D. The United Kingdom has an absolute advantage in the production of umbrellas.
Answer: B
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If country A exports good X to country B and country B exports good Y to country A, it is most likely that
A) A has an absolute advantage in the production of good X. B) B has a comparative advantage in the production of good Y. C) the opportunity cost of domestic production of good Y for country A is lowered with trade. D) B is producing less of good Y than in the no-trade case.
Refer to the above figure. Profits will be positive
A) when the price equals $1. B) when the price equals $2. C) at prices between $1 and $2. D) when the price is above $2.