Learning Path
Question & Answer
Choose the Best Answer
Country X will import electronics from Country Y, leading to increased production costs in both countries.
Country X will export electronics to Country Y, and in return, import agricultural products, resulting in overall economic growth.
Country Y will not benefit from trade as it would prefer to produce everything domestically.
Both countries will experience a decrease in total production due to trade restrictions.
Understanding the Answer
Let's break down why this is correct
Country X uses its skill in electronics to make more of it, and Country Y uses its skill in farming to make more food. Other options are incorrect because This answer assumes Country Y makes electronics, but it is actually good at farming; The idea that a country can be happy making everything by itself ignores the fact that it could use other country’s cheaper goods.
Key Concepts
Specialization and Trade
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Deep Dive: Specialization and Trade
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Definition
Specialization and trade refer to countries focusing on producing goods they have a comparative advantage in and trading with other countries. This concept allows nations to benefit from producing efficiently and trading for goods they cannot efficiently produce, leading to overall economic growth and welfare improvements.
Topic Definition
Specialization and trade refer to countries focusing on producing goods they have a comparative advantage in and trading with other countries. This concept allows nations to benefit from producing efficiently and trading for goods they cannot efficiently produce, leading to overall economic growth and welfare improvements.
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