If Two Nations Want to Trade with One Another, They

question 43

Multiple Choice

If two nations want to trade with one another, they can determine their respective comparative advantages by

• A)hiring economists to gather and interpret the relevant data.
• B)computing the opportunity costs of all goods and services.
• C)first determining which has absolute advantage in the production of goods and services.
• D)allowing firms in each country to freely engage in international trade.
• E)making certain that the prices of tradable goods and services are equal in both nations.

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Definitions:

Retained Earnings

The portion of net earnings not distributed as dividends to shareholders but retained by the company to reinvest in its core business or to pay debt.

Net Income

The total profit of a company after all expenses, taxes, and costs have been deducted from total revenue.

Dividend

A payout of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.

Treasury Stock

Treasury stock represents shares of a company's own stock that it has reacquired and holds, which do not confer voting rights or dividend payments.