Evaluate the following statement: is it true, false, or uncertain? "The United States can produce more tomatoes and avocados compared to Mexico, therefore there is no need for the United States to trade with Mexico for these goods." The statement is true. The United States has an absolute advantage in the production of both avocadoes and tomatoes. Due to this efficiency, it cannot benefit from trade with Mexico. The statement is false. Even though the United States has an absolute advantage in the production of both avocadoes and tomatoes, Mexico will still have a comparative advantage in one of these. Therefore, trade can be beneficial to both. The statement is uncertain. There is not enough information on the opportunity cost of producing each good for both countries. Therefore we cannot pass a valid conclusion.
Evaluate the following statement: is it true, false, or uncertain? "The United States can produce more tomatoes and avocados compared to Mexico, therefore there is no need for the United States to trade with Mexico for these goods." The statement is true. The United States has an absolute advantage in the production of both avocadoes and tomatoes. Due to this efficiency, it cannot benefit from trade with Mexico. The statement is false. Even though the United States has an absolute advantage in the production of both avocadoes and tomatoes, Mexico will still have a comparative advantage in one of these. Therefore, trade can be beneficial to both. The statement is uncertain. There is not enough information on the opportunity cost of producing each good for both countries. Therefore we cannot pass a valid conclusion.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter33: International Trade
Section: Chapter Questions
Problem 2SCQ: Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40...
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Transcribed Image Text:International Trade-End of Chapter Problem
Evaluate the following statement: is it true, false, or uncertain? "The United States can produce more tomatoes and avocados
compared to Mexico, therefore there is no need for the United States to trade with Mexico for these goods."
The statement is true. The United States has an absolute advantage in the production of both avocadoes and tomatoes.
Due to this efficiency, it cannot benefit from trade with Mexico.
The statement is false. Even though the United States has an absolute advantage in the production of both avocadoes
and tomatoes, Mexico will still have a comparative advantage in one of these. Therefore, trade can be beneficial to both.
O The statement is uncertain. There is not enough information on the opportunity cost of producing each good for both
countries. Therefore we cannot pass a valid conclusion.
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