66.
Consider the no-trade input/output situation presented in the following table and graph for countries A and B. Assuming that free trade is legal; develop a scenario that will benefit the citizens of both countries.
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A.
Country B should make all the textiles and trade with Country A for food.
B.
Country A should make nothing but textiles and trade with Country B for food.
C.
Country B should make all the textiles and Country A should make all the food.
D.
Country B should make nothing but textiles and trade with Country A for food.
67.
Countries A and B currently consume 400 units of food and 400 units of textiles each and currently do not trade with one another. The citizens of country A have to give up one unit of food to gain two units of textiles, while the citizens of country B have to give up one unit of textiles to gain two units of food. Their production possibilities curves are shown.
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Under the theory of comparative advantage
A.
The citizens of country A should make food and trade with the citizens of country B for textiles.
B.
The citizens of country A should make textiles and trade with the citizens of country B for food.
C.
There are no gains from trade in this example.
D.
A is twice as good as B at making food and B is twice as good as A at making textiles.
68.
Counties A and B currently consume 400 units of food and 400 units of textiles each and currently do not trade with one another. The citizens of country A have to give up one unit of food to gain two units of textiles, while the citizens of country B have to give up one unit of textiles to gain two units of food. Their production possibilities curves are shown.
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Under the theory of comparative advantage, if free trade is allowed, the market clearing price (or exchange rate if you will) between food and textiles will be
A.
one unit of food for one unit of textiles.
B.
somewhere between One unit of food for two units of textiles and two units of food for one unit of textiles.
C.
one unit of food for two units of textiles.
D.
two units of food for one unit of textiles.
