In Country T, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In Country Y, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1...




In Country T, it takes 10 resources to produce 1 ton of cocoa and 13.5 resources to produce 1 ton of rice. In Country Y, it takes 40 resources to produce 1 ton of cocoa and 20 resources to produce 1 ton of rice. Country T has a comparative advantage over Country Y in cocoa. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it; however, this conclusion stems from which of these inaccurate assumptions?





Multiple Choice




  • We have assumed constant returns to scale.





  • We have assumed the prices of resources and exchange rates in the two countries are dynamic.





  • We have assumed there are barriers to the movement of resources from the production of one good to another within the same country.





  • We have assumed that agrarian nations do not specialize in producing particular products.





  • We have assumed diminishing returns to specialization.






Jun 08, 2022
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