A-LevelEconomicsInternational economic issues9708/12 · Oct/Nov 2020 · Q231 Mark
The diagram shows the production possibility curves for two economies using all resources. Country X can produce 10 million cars or 20 million bicycles and country Y can produce 20 million cars or 40 million bicycles. Which statement is correct about country X and country Y according to the theory of comparative advantage?
This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.
ACountry X and country Y would not gain from free trade.
BCountry X has a lower opportunity cost ratio in producing cars and bicycles than country Y.
CCountry X has an absolute advantage over country Y in the production of both goods.
DCountry Y will have a faster rate of economic growth than country X.
✓ Correct answer
A: Country X and country Y would not gain from free trade.
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