Question

Alzuria and Narnia are two open economies that produce goods A and B. The productivity of workers in industry B in Narnia is higher than the productivity of the Alzurian workers producing B. This led industry experts to claim that Narnia should specialize in the production of B and export it to Alzuria in exchange for good A.
Which of the​ following, if​ true, would weaken this​ argument?
A. The production of B in Alzuria involves increasing opportunity cost.
B. People in Alzuria are not very loyal to their national brands.
C. The government of Narnia does not provide any subsidies to any of its industries.
D. The opportunity cost of producing good B in Narnia is much lower than the opportunity cost of producing the same good in Alzuria.
E. The variety of B produced in Alzuria is more suited to the preferences of the local people than good B produced in Narnia.

Answer 1

Answer:

E.

Explanation:

Narnia has a absolute advantage over that product, but the acceptance and actual profit of the product depends on many factors, one of them being the preference of people from that country. It doesn't matter if Narnia has a little more advantage in that production, if people from Alzuria would not buy their product, it would not be a fair trade and Narnia could actually loose money because they would not sell as many products in Alzuria.