Assume that there are two nations, Alpha and Beta. Each nation produces two products, wheat and steel. Alpha has a comparative advantage in the production of wheat. If the two nations trade, the trade price of wheat in terms of steel will be
A. greater than the domestic opportunity cost of wheat in both nations.
B. less than the domestic opportunity cost of wheat in both nations.
C. less than the domestic opportunity cost of wheat in Alpha and greater than the domestic opportunity cost of wheat in Beta.
D. greater than the domestic opportunity cost of wheat in Alpha and less than the domestic opportunity cost of wheat in Beta.
Answer: D
You might also like to view...
Economics is the social science that studies
A) the real reasons people buy goods and services. B) the psychology of individuals and businesses. C) whether a nation has enough natural resources. D) how people make choices to cope with scarcity. E) how choices made in the social interest could eliminate scarcity.
When a firm's long-run average cost is constant as output increases, the firm is experiencing constant returns to scale
Indicate whether the statement is true or false