Suppose That in Colombia One Unit of Labor Can Produce

question 91

Multiple Choice

Suppose that in Colombia one unit of labor can produce 8 tons of papayas or 2 tons of bananas. In Brazil, one unit of labor can produce either 4 tons of papayas or 1 ton of bananas. Given this information, which of the following statements is true?

• A) Columbia has a comparative advantage in producing papayas but not bananas.
• B) Columbia has a comparative advantage in producing papayas and bananas.
• C) These countries would increase combined consumption if they specialized and traded.
• D) These countries cannot gain from trading.

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Definitions:

Working Capital Decision

The process of managing the short-term assets and liabilities of a firm to ensure it operates efficiently and can meet its obligations.

Capital Expenditure

Funds spent by a company to acquire, upgrade, and maintain physical assets such as property, industrial buildings, or equipment.

Working Capital Management

Planning and managing the firm’s current assets and liabilities.

Inventory

Raw materials, work-in-progress, and finished goods that are considered assets and intended for sale in the ordinary course of business.