A country will be able to consume a combination of goods that is NOT attainable solely from domestic production if
A) the country avoids international trade.
B) the country specializes in one product.
C) the world terms of trade equal the domestic relative costs.
D) the world terms of trade differ from its domestic relative costs.
E) the country's domestic production value equals world relative value.

Question

Quizplus · Accepted Answer

If the world terms of trade differ from a country's domestic relative costs, then it can benefit from importing goods that it is relatively inefficient at producing and exporting goods that it is relatively efficient at producing. This allows the country to consume a combination of goods that is not attainable solely from domestic production.

A Country Will Be Able to Consume a Combination of Goods