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Assume the Following Information

Question 14

Multiple Choice

Assume the following information:
Assume the following information:   Which of the following statements is correct? A)  Country A has a comparative advantage in the production of grain. B)  Country A has an absolute advantage in the production of grain. C)  In this example the theory of specialization expounded by David Ricardo cannot solve for the equilibrium trade relationship but the theory of Adam Smith can. D)  In the absence of specialization and trade, Country B is behaving like a mercantilist. E)  Both statements a and d are correct. Which of the following statements is correct?


A) Country A has a comparative advantage in the production of grain.
B) Country A has an absolute advantage in the production of grain.
C) In this example the theory of specialization expounded by David Ricardo cannot solve for the equilibrium trade relationship but the theory of Adam Smith can.
D) In the absence of specialization and trade, Country B is behaving like a mercantilist.
E) Both statements a and d are correct.

Correct Answer:

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