Asked by Daman Preet Dhillon on Jun 12, 2024
Verified
If the _____ differ(s) between two countries,this suggests the possibility for mutually advantageous trade.
A) currency
B) factor endowments
C) exchange rate
D) level of government spending for defense
Factor Endowments
Refers to the quantities of productive resources a country has available, including labor, land, and capital.
Trade Advantage
The benefit or edge a country, region, or business has in producing a specific good or service more efficiently than competitors.
- Grasp the importance of factor endowments in defining comparative advantage.
- Implement the concepts of opportunity cost and comparative advantage in studying the trade exchanges among countries.
Verified Answer
ZK
Zybrea KnightJun 14, 2024
Final Answer :
B
Explanation :
If two countries have different factor endowments, such as one country having an abundance of natural resources while the other has a skilled labor force, they may be able to specialize in producing the goods that they are relatively more efficient at producing and then trade with each other. This can lead to mutually advantageous trade as both countries benefit from being able to acquire the goods they need at a lower cost than if they were producing them domestically. Differences in currency, exchange rate, and government spending for defense may also impact trade, but they do not necessarily suggest the possibility for mutually advantageous trade.
Learning Objectives
- Grasp the importance of factor endowments in defining comparative advantage.
- Implement the concepts of opportunity cost and comparative advantage in studying the trade exchanges among countries.
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