SCENARIO: HOME'S WILLINGNESS TO TRADE WHEAT FOR CLOTH
Home has a comparative advantage in wheat, and Foreign has a
Comparative advantage in cloth.Once trade occurs, Home produces
1,500 bushels of wheat, and Foreign produces 1,000 yards of cloth.The
Following table shows the amount of wheat that Home is willing to trade
To acquire more cloth.

Reference: Ref 213
(Scenario: Home's Willingness to Trade Wheat for Cloth) Suppose that
Home's export price rose from 0.5 bushel of wheat per yard of cloth in
2009 to a bushel of wheat per yard of cloth in 2010.Which of the
Following statements is TRUE?
A)Home's situation had greatly improved in 2010.
B)Home's situation had deteriorated in 2010.
C)Home's situation was the same as it was in 2009.
D)Home's situation had slightly improved in 2010.

Question

SCENARIO: HOME'S WILLINGNESS TO TRADE WHEAT FOR CLOTH
Home has a comparative advantage in wheat, and Foreign has a
Comparative advantage in cloth.Once trade occurs, Home produces
1,500 bushels of wheat, and Foreign produces 1,000 yards of cloth.The
Following table shows the amount of wheat that Home is willing to trade
To acquire more cloth.

Reference: Ref 2­13
(Scenario: Home's Willingness to Trade Wheat for Cloth) Suppose that
Home's export price rose from 0.5 bushel of wheat per yard of cloth in
2009 to a bushel of wheat per yard of cloth in 2010.Which of the
Following statements is TRUE?
A)Home's situation had greatly improved in 2010. 
B)Home's situation had deteriorated in 2010. 
C)Home's situation was the same as it was in 2009. 
D)Home's situation had slightly improved in 2010.

Quizplus · Accepted Answer

Home's export price for cloth increased from 0.5 bushel of wheat per yard of cloth to 1 bushel of wheat per yard of cloth. This means that Home now has to give up more wheat to acquire the same amount of cloth, indicating that their situation has deteriorated in 2010.