Author Question: Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 ... (Read 63 times)

Haya94 · **on:** Jun 30, 2018

Suppose France can produce 9,000 potatoes or 3,000 lemons per day, and that Italy can produce 3,000 potatoes or 3,000 lemons per day. Which of the following statements in this context is true?
a. France has an absolute advantage in producing lemons.
b. Italy has a comparative advantage in producing potatoes.
c. Italy would be willing to trade one lemon for anything greater than one potato.
d. Both countries would be willing to trade at a rate of one lemon for one potato.
e. France has a comparative advantage in producing lemons.

Question 2

When the production or consumption of a good involves an externality:
a. resources are necessarily overallocated to the good.
b. resources are necessarily underallocated to the good.
c. someone not involved in buying or selling the good is affected.
d. the market will efficiently allocate resources to its production.