Use the Following to Answer Question(s): Production Possibilities Schedule for Two

question 182

Multiple Choice

Use the following to answer question(s) : Production Possibilities Schedule for Two Commodities

-(Exhibit: Production Possibilities Schedule for Two Commodities) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of commodity X each country would have to forgo to produce the additional units of commodity Y indicated.Further assume that the only input is labor and that it remains fully employed.If there were unrestricted trade and specialization according to the law of comparative advantage:

• A) the United States would export Y and Canada would export X.
• B) the United States would export X and Canada would export Y.
• C) the United States would export both X and Y.
• D) the United States and Canada would each be self-sufficient in both X and Y.

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Definitions:

GDP Changes

The alterations in the Gross Domestic Product of a country, indicating the rate of growth or decline in the economy over a period.

Risk Premium

The extra return above the risk-free rate that investors require as compensation for the risk of an investment.

Simple CAPM

A model that describes the relationship between the risk of a security and its expected return, based on the premise that markets are efficient.

Risk-free Rate

The theoretical return on an investment with zero risk, typically represented by the yield on government bonds.