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The Small Country General Equilibrium (PPF/indifference Curve) Model of International

Question 15

Multiple Choice

The small country general equilibrium (PPF/indifference curve) model of international trade brought out a number of important points, among which is/are:


A) Whenever the relative prices of goods are the same, countries can enhance national welfare by engaging in exchange, but they cannot gain from specialization.
B) Producers will specialize and produce more of the goods that, compared to world prices, were relatively expensive at home and fewer of the goods that were relatively cheap.
C) A country exports goods that are relatively cheap at home, compared to overseas prices, and imports goods that are relatively expensive at home.
D) All of the above.
E) None of the above.

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