Subject - Economics:

Microeconomics

MCQ - 111-4121

Question:

The figure above shows the production possibility frontiers (PPFs) for two nations that produce crabs and cakes. If these nations specialize and trade based on the principle of comparative advantage, which of the following trade agreements benefit both nations?

Nation A trades three crabs to Nation B in exchange for two cakes.
Nation A trades three cakes to Nation B in exchange for three crabs.
Nation A trades one cake to Nation B in exchange for two crabs.
Nation A trades three cakes to Nation B in exchange for three crabs.
Nation A trades four crabs to Nation B in exchange for six cakes.

Correct Answer: A

Explanation:

Nation A has comparative advantage in crab production, and Nation B has comparative advantage in cake production. Nation A specializes in crabs and Nation B specializes in cakes, so avoid any option suggesting the opposite. Choice A is the only one that allows both to consume beyond the PPF.

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269 MCQ for effective preparation of the test of Microeconomics of Economics section.

Read the MCQ statement: The figure above shows the production possibility frontiers (PPFs) for two nations that produce crabs and cakes. If these nations specialize and .... it both nations? , keenly and apply the method you have learn through the video lessons for Microeconomics to give the answer. Record your answer and check its correct answer and video explanation for MCQ No. 111-4121.

How to Answer

Solve the question for MCQ No. and decide which option (A through D/E) is the best choice to answer the MCQ, then click/tap the blue button to view the correct answer and it explanation.

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