Figure 3-1 -Refer to Figure 3-1. Assume That Cliff and Paul Were

question 40

Multiple Choice

Figure 3-1
-Refer to Figure 3-1. Assume that Cliff and Paul were both producing wheat and corn, and each was dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. What would happen to the total production of corn?

• A) It would increase by 1 bushel.
• B) It would increase by 3 bushels.
• C) It would increase by 5 bushels.
• D) It would increase by 7 bushels.

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Definitions:

Debt-For-Equity Swaps

A financial restructuring tool where a portion of debt is exchanged for a pre-determined amount of equity or stock.

Fair Value

An estimation of the market value of an asset or liability based on the assumptions market participants would use when pricing the asset or liability.

Derivatives

Financial instruments whose value is derived from the value of one or more underlying assets or indices.

Hedges

Financial strategies or instruments used to offset potential losses or gains in another investment or position.