Question

Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper?

Answer 1

The complete question is:

Some time ago, the nation of Republica opened up its paper market to international trade. Which of the following results of this policy change is consistent with the notion that Republica has a comparative advantage over other countries in producing paper?

a. The price of paper in Republica decreased as a result of the policy change.

b.Republica began exporting paper as a result of the policy change.

c.The domestic demand curve for paper shifted to the right as a result of the policy change.

d.The domestic quantity of paper demanded increased as a result of the policy change

Answer:

b.Republica began exporting paper as a result of the policy change.

Explanation:

When a country has comparative advantage in producing a product, they can produce the product at a lower cost compared to other nations. So they tend to leverage their comparative advantage by exporting to nations that do not have comparative advantage in that good.

If after Republica opens up its paper market to international trade, it starts to export paper. This indicates Republica has comparative advantage in producing paper.