Question

The government of "ABC Country" is trying to decide what products to encourage domestic manufacturers to produce with the goal of exporting these goods internationally. The government realizes that its domestic manufacturers cannot produce any single product better than manufacturers in other countries, however, ABC Country's domestic manufacturers are pretty good at producing two different products: furniture and shoes.

To help ABC Country select one of these two products to encourage domestic manufacturers to begin producing and exporting, what should ABC Country determine to help make the best decision?
A The opportunity costs associated with manufacturing and exporting each one of these products instead of the other.
B The economic risk in ABC Country.
C The law of one price.
D The amount of trade creation these products would drive when produced together.

Answer 1

To make the best decision, ABC Country should determine the opportunity costs associated with manufacturing and exporting each product instead of the other.

Step-by-step explanation:

In order to make the best decision about which product to encourage domestic manufacturers to produce and export, ABC Country should determine the opportunity costs associated with manufacturing and exporting each product instead of the other (Option A). Opportunity cost refers to the value of the best alternative forgone when a decision is made. By comparing the opportunity costs of producing furniture and shoes, ABC Country can determine which product provides a comparative advantage and is more beneficial to produce.