International Economics Trade Exchange Rates and Globalization Practice Questions | A-Level Economics

International Economics Trade Exchange Rates and Globalization

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Two countries, Alpha and Beta, can each produce textiles (T) and semiconductors (S) using only labour with constant opportunity cost. In one day Alpha can produce \(120T\) or \(30S\). In one day Beta can produce \(150T\) or \(75S\). Transport costs are negligible and markets are competitive. Which specialisation pattern is most consistent with comparative advantage and gains from trade?

Select one option.

Alpha specialises in textiles and Beta specialises in semiconductors
Alpha specialises in semiconductors and Beta specialises in textiles
Both specialise in textiles because textiles use more labour
Both specialise in semiconductors because semiconductors have higher unit value
No gains from trade exist because Beta has absolute advantage in both goods

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