Asked by
Vanessa Bermudez
on Dec 12, 2024
Verified
Suppose there are only two goods in the world, corn and shirts. If it is true that with its vast resources the United States could produce both more corn and more shirts than Mexico,
A) Mexico will never have a comparative advantage and, thus, can never gain from trading with the United States.
B) trade between the United States and Mexico will make the United States better off but will leave Mexico worse off unless the wage of workers in Mexico rises to equal that of American workers.
C) total production of corn and shirts cannot be increased through specialization and trade.
D) both countries will be able to gain from specialization and trade as long as relative costs of producing the two goods are different in Mexico than in the United States.
Comparative Advantage
The capability of a nation, person, corporation, or area to create a product or service at a reduced opportunity cost compared to its rivals.
Vast Resources
An abundance of natural, financial, or human resources available for use or development.
Specialization And Trade
A principle whereby individuals, firms, or countries produce a limited range of goods with higher efficiency and trade for other goods they are less efficient at producing.
- Comprehend the principle of comparative advantage and its utilization in global commerce.
- Gain insight into the effects of specialization and trade within international markets.
Verified Answer
IS
Learning Objectives
- Comprehend the principle of comparative advantage and its utilization in global commerce.
- Gain insight into the effects of specialization and trade within international markets.