CFA CFA Level 1 Problem with a question from Q-Bank

Problem with a question from Q-Bank

  • Author
    Posts
    • Up
      0
      ::

      Question ID#: 89110

      The table below outlines the possible tradeoffs of producing units of cloth and corn for both Country A and Country B.

      Country A cloth / corn

      1: 0 // 4
      2: 6 // 3
      3: 14 // 0

      Country B cloth / corn

      1: 0 // 8
      2: 8 // 6
      3: 18 // 0

      Which scenario best describes the effects of trade between the countries?

      A) Both countries would gain if Country A traded corn for Country B’s cloth.
      B) Both countries would gain if Country A traded cloth for Country B’s corn.
      C) Country B would not gain from trade, because it has an absolute advantage in the production of both goods.

      The given answer is (B), which would usually be the no-brainer. But, in case both countries select the second given production scenario, there will actually be a production that exceeds the production in the trade scenario. So I took answer (C). What do you guys think on that?

    • Up
      3
      ::

      Question ID#: 89110

      But, in case both countries select the second given production scenario, there will actually be a production that exceeds the production in the trade scenario. So I took answer (C).


      @Chevalier
      – what do you mean by the sentence above?

    • Up
      2
      ::

      oh wow… now I see it… sorry for bothering…

Viewing 2 reply threads
  • You must be logged in to reply to this topic.