Suppose there are only two goods ( and ), two countries ( and ), and labour is the only factor of production. The amount of labour required to produce a unit of the -th good in the -th country is a constant, . Suppose . If these two countries trade with each other, which of the following outcomes would definitely not occur in equilibrium?
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Suppose there are only two goods (X and Y), two countries (A and B), and labour is the only factor of production. The amount of labour required to produce a unit of the i -th good in the j -th country is a constant, lᵢⱼ. Suppose l_(XA)/l_(YA)<l_(XB)/l_(YB). If these two countries trade with each other, which of the following outcomes would definitely not occur in equilibrium? (A) A produces only X and B produces only Y (B) A produces both goods and B produces only Y (C) A produces only X and B produces both goods (D) Both countries produce both goods
Also written as: Suppose there are only two goods (X and Y), two countries (A and B), and labour is the only factor of production. The amount of labour required to produce a unit of the i -th good in the j -th country is a constant, l_(ij). Suppose l_(XA)/l_(YA)<l_(XB)/l_(YB). If these two countries trade with each other, which of the following outcomes would definitely not occur in equilibrium?
Theories of international trade has come up 151 times in 6 exams since 2006.
This question is on Specialisation and the gains from trade, part of Theories of international trade in International Economics.
How specialisation raises consumption possibilities, including complete and incomplete specialisation.
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Question from the DSE 2006 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.