Karl can produce either 10 tons of oranges or 5 tons of apples in a year, while Adam can produce either 5 tons of oranges or 10 tons of apples. If there are only two goods in the world-apples and oranges-and the exchange rate between apples and oranges in international markets is 1 ton of apples per 3 tons of oranges, which of the following is likely to be true?
A) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries.
B) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export apples to other countries.
C) Karl has a comparative advantage in oranges and will specialize in only oranges.
D) Adam has a comparative advantage in oranges and will specialize in only oranges.
E) Karl has an absolute advantage in apples and will specialize in only apples.
Correct Answer:
Verified
Q28: Comparative advantage exists when a person or
Q29: Alpha can produce either 18 tons of
Q30: Suppose the opportunity cost of producing 1
Q31: In 2011, U.S. exports of goods and
Q32: Karl can produce either 10 tons of
Q34: Karl can produce either 10 tons of
Q35: Karl can produce either 10 tons of
Q36: According to Ricardo's theory of international trade,
Q37: The United States is the world's leading
Q38: Which of the following is true of
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents