Use the following to answer questions :
Figure 18-4
-Assume that there is free trade and negligible transportation costs between Country A and Country B.Which of the following is false in reference to Figure 18-4?
A)Country A exports oil.
B)Country B is relatively inefficient in the production of oil.
C)Country B imports oil.
D)Country B consumes more oil than it would in equilibrium without trade.
E)All of the above are true.

Question

Use the following to answer questions :
Figure 18-4 
-Assume that there is free trade and negligible transportation costs between Country A and Country B.Which of the following is false in reference to Figure 18-4?
A)Country A exports oil. 
B)Country B is relatively inefficient in the production of oil. 
C)Country B imports oil. 
D)Country B consumes more oil than it would in equilibrium without trade. 
E)All of the above are true.

Quizplus · Accepted Answer

Given the assumptions of free trade and negligible transportation costs, all the statements align with the principles of comparative advantage and the effects of trade. Country A exporting oil suggests it has a comparative advantage in oil production. Country B being relatively inefficient in oil production implies it would import oil, which is consistent with comparative advantage theory. Country B consuming more oil than it would in equilibrium without trade reflects the benefit of accessing cheaper oil through trade, allowing for higher consumption levels.

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