Which of the following statements is CORRECT? one The act of buying at a low pri

Question

Which of the following statements is CORRECT? one The act of buying at a low price in one place and selling at a high price in another place is called relative pricing Free trade with constant-cost production-possibility curves usually leads to partial production specialization. If Country X has a higher level of labor productivity than the rest of the world in the production of a good, then Country X has a comparative advantage in the production of the good. O According to the theory of comparative advantage, countries will export those goods for which they have a lower opportunity cost and import those goods for which they have a higher opportunity cost than the rest of the world.

Explanation / Answer

1.

D

A country produces that goods in which, it has comparative advantage and export the same and import another good from another country having comparative advantage in another good.

2.

B

USA has lower opportunity cost in production of wine, whereas France has lower opportunity cost in production of cheese. So, USA has comparative advantage in Wine production and France has comparative advantage in production of cheese.

3.

B

Belgium has the lower opportunity cost in producing Broom, hence a comparative advantage. So, Belgium will export brooms.

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