If Canada imports fishing poles from Mexico and Mexico imports bacon from Canada, which of the following would explain this pattern of trade?
A) The opportunity cost of producing fishing poles in Canada is higher than the opportunity cost of producing bacon in Mexico.
B) Mexico has a higher opportunity cost of producing fishing poles than Canada, and Canada has a higher opportunity cost of producing bacon.
C) Mexico must have an absolute advantage in producing fishing poles and Canada must have an absolute advantage in bacon.
D) Mexico has a lower opportunity cost of producing bacon than Canada and Mexico has a comparative advantage in producing fishing poles.
A
You might also like to view...
Betty and Ann live on a desert island. With a day's labor, Ann can produce 6 fish or 4 coconuts; Betty can produce 3 fish or 1 coconut. Betty's opportunity cost of producing 1 fish is ________, and she should specialize in the production of ________
A) 1/3 coconut per fish; fish B) 2/3 coconut per fish; coconuts C) 1 coconut per fish; fish D) 4 coconuts per fish; fish
Suppose that govt spending on defense rises by $50 billion. What happens to the AD curve?
A. It shifts right by $50 billion at each price level. B. It shifts right by more than $50 billion at each price level. C. It shifts right by less than $50 billion at each price level. D. The aggregate demand curve does not shift; the aggregate supply curve shifts right by $50 billion at each price level.