If a country began exporting product A and importing product B,then,as compared to the autarky (no-trade)situation,the marginal cost of product A will
A) increase.
B) decrease.
C) shift outward.
D) shift inward.
E) remain the same.

Question

Quizplus · Accepted Answer

When a country begins to export product A, it will increase production to meet the demand of the international market. As a result, the marginal cost of producing product A will increase due to the higher production level, resulting in higher costs of production, such as wages and raw materials. Additionally, when the country begins importing product B, it will reduce production of that product domestically, resulting in a reduction in the marginal cost of that product. However, since we are only concerned with the effect on product A, the correct answer is A) increase.

If a Country Began Exporting Product a and Importing Product