Answered: When Romania opened itself to…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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When Romania opened itself to international trade, the price of corn in Romania almost doubled. A. Does Romania have comparative advantage in the production of corn? B. Is Romania an exporter or an importer of corn? C. Romanian consumers of corn will be better off or worse off? How about the producers? D. Are there any gains from international trade?

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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