In the Figure Given Below AB Is the Production-Possibility Curve

question 42

Multiple Choice

In the figure given below AB is the production-possibility curve of Canada. In the absence of trade, the price ratio is 1 bushel of wheat/bale of cotton as shown by the line PQ. The international price ratio is 0.25 bushels of wheat/bale of cotton as shown by the line RS. I₁ and I₂ are the pre-trade and the post trade community indifference curves of Canada respectively. In the absence of trade Canada will:

• A)produce and consume at point S_1.
• B)produce and consume at point C_0.
• C)produce at point S₁ and consume at point C_0.
• D)produce and consume at point C₁.

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Definitions:

Cash Payback Period

The time period required for the cash inflows from a capital investment project to cover the initial cash outlay.

Net Cash Inflow

The surplus of cash revenues over cash expenses in a given period, indicating the liquidity added to an entity.

Useful Life

The estimated duration for which an asset is expected to be functional and economically feasible for its intended purpose.

Annual Operating Income

The profit earned from a firm's normal core business operations, excluding deductions of taxes and interest charges.