Economics 9708 · AS & A Level · International trade and free trade

International trade and free trade — practice question

The table sets out cars and televisions produced per worker per week before trade and specialisation. country X: cars 2, televisions 6; country Y: cars 8, televisions 48. Each country concentrates on the product in which it has a comparative advantage and then trades using an exchange rate that is between their opportunity cost ratios. Which change would prevent the countries from specialising and trading?

  • AThe exchange rate moves to one car for five televisions.
  • BThe exchange rate moves to one car for eight televisions.
  • CThe productivity of workers in country X rises to three cars per week.
  • DThe productivity of workers in country Y rises to fifty six televisions per week.

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