If Tom and Di specialize in producing the goods in which he and she have a comparative advantage and they exchange goods, then ________.
A) each will produce a combination of goods that is within her/his production possibility frontier
B) they will lose because they are no longer able to produce and consume both goods
C) each will gain because each can consume a combination of goods that is outside her/his production possibility frontier
D) one of them will gain and the other will lose
Question 2
The figure above shows the market for milk in Cowland. If a subsidy paid to producers of 1 per gallon of milk is introduced, what is the price that consumers pay?
A) 3.00 a gallon
B) between 3.00 and 4.00 per gallon
C) 4.00 a gallon
D) between 4.00 and 5.00 per gallon
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