Which of the Following Describes Comparative Advantage

question 313

Multiple Choice

Which of the following describes comparative advantage?

• A) Firm A can produce a good at a cost of $3 and Firm B can produce the good at a cost of $4.
• B) Jane can type 50 words per minute and Joe can type 60 words per minute.
• C) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn.
• D) Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.

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Definitions:

Dividend-Payout Policies

Strategies a company uses to decide the portion of profits it will distribute to shareholders as dividends versus retaining for reinvestment.

Dividend Yield

A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Volatility

A statistical measure of the dispersion of returns for a given security or market index, indicating the degree of variation from the average.

Hedge Ratio

A ratio used to calculate the number of derivatives needed to hedge a particular position, aiming to provide protection against adverse price movements.