Figure 3-3 Ice Cream and Cones Are Measured in Kilograms

question 44

Multiple Choice

Figure 3-3
Ice cream and cones are measured in kilograms.
-Refer to Figure 3-3. Suppose Ben and Jerry were both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 kg of cones to get 2 kg of ice cream from Jerry. If both decided to specialize in what they had a comparative advantage in and trade, what would be the gains from trade?

• A) 1 kg of cones for Ben and 1 kg of ice cream for Jerry
• B) 1 kg of ice cream for Ben and 1 kg of cones for Jerry
• C) 2 kg of ice cream for Ben and 2 kg of cones for Jerry
• D) 2 kg of ice cream for Ben and 1 kg of cones for Jerry

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Definitions:

Accounts Receivable Period

Also known as the average collection period, it refers to the average number of days it takes a company to collect payments from its credit sales.

Collecting Receivables

Collecting receivables involves the process or steps taken by a business to ensure that payments are received from customers for goods or services provided on credit.

Cash Cycle

The period of time between a company's purchase of inventory and the receipt of cash from accounts receivable.

Operating Cycle

The duration of time from the purchase of inventory to the collection of cash from sales, reflecting the efficiency of a company's operations.