How do countries know when they have a comparative advantage in the production of a good?
A) Government accountants collect cost data from countries and analyze it to find out which country has a comparative advantage in the production of which good.
B) They know as the result of individuals trying to earn profits and buying low and selling high in the process.
C) The United Nations Economic Conference Group analyzes cost data from countries and determines which country has a comparative advantage in the production of which good.
D) There is not one major way that countries acquire this information.
B
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The demand for money curve slopes downward because a rise in the nominal interest rate ________ the opportunity cost of holding money and therefore ________ the quantity of money demanded
A) decreases; decreases B) increases; decreases C) decreases; increases D) increases; does not change E) increases; increases
Purchasing power parity can be used as
A) a long-run gauge, but in the short run large deviations in currency values can exist. B) a short-term gauge, but in the long run large deviations in currency values can exist. C) an indicator of how interest rates will change in the short run. D) an indicator of how interest rates will change in the long run. E) a short-term and long-term gauge of relative currency values.