Q13 Suppose that the world economy consists of Country A and Country B, both of which are of similar size. Both countries produce Good 1 and Good 2. Suppose Country A and Country B open for trade and the world pricefor Good 1 is $15. This results in Country A importing 500 units of Good 1 from Country B. Which of the following must be true?Country A has comparative advantage in Good 2Country B has comparative advantage in Good 1Country B has comparative advantage in Good 2Country A has comparative advantage in Good 1

A country which has a comparative advantage in one good specialises in the production of that good…

Answered: Q13 | bartleby

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Economics

Q13

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Q13

Suppose that the world economy consists of Country A and Country B, both of which are of similar size. Both countries produce Good 1 and Good 2. Suppose Country A and Country B open for trade and the world price
for Good 1 is $15. This results in Country A importing 500 units of Good 1 from Country B. Which of the following must be true?
Country A has comparative advantage in Good 2
Country B has comparative advantage in Good 1
Country B has comparative advantage in Good 2
Country A has comparative advantage in Good 1

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