Question
In a two-country, two-goods economy, Korea and Malaysia produce and trade products in which they have a comparative advantage. In Korea, you have to pay
In a two-country, two-goods economy, Korea and Malaysia produce and trade products in which they have a comparative advantage. In Korea, you have to pay for one yard of clothes to get one kilogram of rice, and in Malaysia you have to pay for two kilograms of rice to get one yard of clothes. Answer following arguments with T (True) or F (False) based on this fact.
1. If Korea fully specializes in rice production and exports, both countries can benefit.
2. If Korea exports clothes and demands more than 2 Kg of rice per Yard of clothes, Malaysia will decide to produce the clothes itself.
3. For trade to occur, the international price of one Kg of rice must be lower than that of half Yard of clothes. 4. If Malaysia produces and exports both clothes and rice, both countries can benefit.
5. In order for trade to occur between two countries, the international price of one Kg of rice must be higher than that of one Yard of clothes.
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