Day: June 7, 2022

Country A has a comparative advantage in producing Barley and country B in producing Aeroplanes.

However, the countries choose not to specialise and trade.

What is a valid reason for this behaviour?

Select ONE answer:

1. The exchange rate lies within the countries’ opportunity cost ratios.
2. There is immobility of factors of production between the countries.
3. Trade is based on absolute rather than comparative advantage.
4. Transport costs are high relative to the opportunity cost differences between the countries.

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Economics KS4 and KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct

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