Imagine Two Countries with Identical Endowments of Resources

question 255

Multiple Choice

Imagine two countries with identical endowments of resources. Using all its resources, Broland can produce 5,000 books or 8,000 forks. Using the same resources, Nomia can produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing books?

• A) Broland, because it gives up 0.63 of a fork for each book produced
• B) Nomia, because it gives up 0.57 of a fork for each book produced
• C) Broland, because it gives up 1.6 forks for each book produced
• D) Nomia, because it gives up 1.75 forks for each book produced

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Definitions:

Capital Account

A financial statement that shows the changes in a company's equity throughout an accounting period, including contributions from and distributions to owners.

Withdrawals Account

An account used to track money taken out of a business by its owner(s) for personal use.

Income Summary

An account used in closing process to collect all revenue and expense account balances before determining net income or loss.

Debit Balance

The condition where the total debits exceed the total credits in an account, typically indicating assets or expenses.