If the opportunity cost of a television set equals 20 cameras in China, but 10 cameras in Japan, then we know
a. all of the following
b. that China has a comparative advantage in producing cameras
c. that Japan has a comparative advantage in producing TV sets
d. that Japan may well have an absolute disadvantage in producing both goods
e. that market exchange of 1 TV set for 15 cameras would produce not only mutually beneficial trade, but would also split the gains from trade equally between the two countries
A
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Which of the following is a general rule for how demand shocks affect the IS curve?
A) Demand shocks will always show up as changes in the expected real exchange rate. B) Demand shocks are usually rare and have little effect. C) When any exogenous variable works to increase demand, IS shifts to the right and, conversely, when any exogenous variable works to decrease demand, IS shifts to the left. D) When any exogenous variable works to increase demand, IS shifts to the left and conversely, when any exogenous variable works to decrease demand, IS shifts to the right.
A firm in monopolistic competition has some degree of price-setting power because
A) in the long run it earns a normal profit. B) it can never earn less than normal profit. C) the price it charges is never more than its marginal cost. D) if it raises its price, the quantity it can sell will not decrease to zero.