Suppose John and Joe Each Have Different Production Possibility Frontiers;

question 38

Multiple Choice

Suppose John and Joe each have different production possibility frontiers; John specializes in cloth and Joe specializes in corn.John's island unexpectedly has exceptionally good weather, and suddenly he is twice as productive in the production of both corn and cloth.Select the best statement.

• A)As a result, John will have an absolute advantage in both corn and cloth.
• B)There will be a change to the goods in which John and Joe specialize, because John's opportunity cost of corn has decreased.
• C)As a result, it is possible that John and Joe will switch the goods in which they specialize.
• D)There will be no change to the goods in which John and Joe specialize, because John's comparative advantage has not changed.
• E)This is an example of unemployed resources becoming employed.

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Definitions:

Equity

It denotes the residual interest in the assets of the entity after deducting liabilities, often referred to as shareholders' equity.

Statement of Consolidated

Financial statements that present the assets, liabilities, and operating results of a parent company and its subsidiaries as one entity.

Retained Earnings

The portion of net profits not distributed as dividends but retained by the company to be reinvested in its core business or to pay debt.

Acquisition Differential

The difference between the purchase price of an acquired company and the net value of its identifiable assets and liabilities.