If the U.S. exports machines and India exports cloth, which of the following statements would be incorrect?
A) India can consume more with trade.
B) The U.S. can consume more with trade.
C) World production of machines and cloth will rise.
D) India would be worse off because they would consume less.
E) None of the above

Question

Quizplus · Accepted Answer

This statement would be incorrect because in a scenario where the U.S. exports machines and India exports cloth, both countries are likely engaging in trade to capitalize on their comparative advantages. This means that each country specializes in the production of goods for which they have a lower opportunity cost, and they trade to obtain goods that would be more costly for them to produce domestically.
A) India can consume more with trade. This is likely correct because by exporting cloth, India can import machines, which may be more expensive or inefficient for them to produce domestically. This allows India to enjoy a greater variety of goods or more of certain goods than it could without trade.
B) The U.S. can consume more with trade. This is also likely correct because by exporting machines, the U.S. can import cloth, which may be cheaper or of a variety that is not produced domestically. This increases the U.S.'s consumption possibilities beyond its production possibilities frontier.
C) World production of machines and cloth will rise. This is likely correct because when countries specialize based on comparative advantage and trade, global output can increase as resources are used more efficiently.
Therefore, the incorrect statement is D) India would be worse off because they would consume less. In fact, through trade, India would likely be better off as it would be able to consume more or different goods than it could without trade.

If the US Exports Machines and India Exports Cloth, Which of the of the Following