In a Two-Country, Two-Product World, the Statement "Germany Enjoys a Comparative

question 45

Multiple Choice

In a two-country, two-product world, the statement "Germany enjoys a comparative advantage over France in autos relative to ships" is equivalent to

• A) France having a comparative advantage over Germany in ships.
• B) France having a comparative disadvantage compared to Germany in autos and ships.
• C) Germany having a comparative advantage over France in autos and ships.
• D) France having no comparative advantage over Germany.
• E) France should produce autos.

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Definitions:

Annuity Due

A type of annuity in which payments are made at the beginning of each period, rather than at the end.

Present Value

The present worth of a sum of money or a series of cash flows expected in the future, assuming a certain rate of return.

Compounded Annually

A method of calculating interest where the interest rate is applied once per year, and each year’s interest calculation includes the interest from the previous years.

Annual Rents

Regular payments made for the use of property or land over a yearly basis.