The maximum quantity of food and cloth that two countries A and B can produce by using all of the factors of production in their respective countries at constant cost is given below in the table:
| Country A | Country B | |
|---|---|---|
| Food | 600 | 400 |
| Cloth | 800 | 200 |
If the countries open up to free trade, then
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Theories of international trade has come up 151 times in 6 exams since 2006.
This question is on Absolute and comparative advantage, part of Theories of international trade in International Economics.
Why countries trade: producing more cheaply in absolute terms, or at lower opportunity cost.
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Question from the JNU SIS 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.