Each Trading Nation Can Gain by Specializing in Producing Those

question 15

Multiple Choice

Each trading nation can gain by specializing in producing those things for which it is a low-opportunity cost producer. This statement best describes the implications of the

• A) free rider problem.
• B) law of comparative advantage.
• C) infant-industry argument.
• D) law of diminishing marginal returns.

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Definitions:

Spot Exchange Rate

The ongoing market rate for the prompt conversion of one currency into another.

Futures Price

The agreed price for the underlying asset in a futures contract to be paid on the contract's settlement date.

Portfolio's Beta

A measurement of a stock portfolio's volatility compared to the market as a whole.

S&P 500

An indicator of the economic and stock market performance, tracking 500 publicly traded companies in the United States.