In the Ricardian model, in the no trade scenario (assuming no corner solutions), suppose we initially observe
Question:
In the Ricardian model, in the no trade scenario (assuming no corner solutions), suppose we initially observe that the iso-revenue curve is flatter than the PPF curve. Given this initial condition, this would result in or set into motion the following:
a. A surplus of good Y. b. Profit-maximizing producers would desire to produce only good X. c. The resulting surpluses and shortages would lead to price changes such that the iso-revenue curve would become even flatter. d. this implies (Px/Py) > (MCx/MCy). e. an adjustment in prices will continue until the highest iso-revenue curve is such that the country will be able to consume bundles that lie beyond its PPF in the no-trade scenario. f. none of the above are correct. g. two of the above are correct. h. three of the above are correct.