Suppose that a country's factors of production are "completely specific" to the industries In which they are located (i.e., factors in the X industry would contribute nothing to Y Output if they were employed in the Y industry and factors in the Y industry would Contribute nothing to X output if they were employed in the X industry) . In addition, Suppose that the country has an autarky PX/PY that is greater than the world PX/PY. In this
Situation, if the country is opened to international trade, it will
A) export good X and will obtain "gains from specialization" (a "production gain") but not "gains from exchange" (a "consumption gain") .
B) export good X and will obtain "gains from exchange" (a "consumption gain") but not "gains from specialization" (a "production gain") .
C) export good Y and will obtain "gains from specialization" (a "production gain") but not "gains from exchange" (a "consumption gain") .
D) export good Y and will obtain "gains from exchange" (a "consumption gain") but not "gains from specialization" (a "production gain") .
Correct Answer:
Verified
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