You Invested $5,000 in the Cog Corporation and $5,000 in the Gear

question 55

Multiple Choice

You invested $5,000 in the Cog corporation and $5,000 in the Gear corporation. Both of these corporations have $100 million in total assets. The Cog corporation had a net profit of $5 million and the Gear corporation had a net profit of $10 million. You read their annual reports and both companies had established a goal of having a net profit equal to 15% of total assets.

• A) Cog is more effective than Gear.
• B) Cog is more efficient than Gear.
• C) Gear is more efficient than Cog.
• D) Gear is more effective than Cog.
• E) Cannot tell without more information.

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Definitions:

Comparative Disadvantage

A situation where a country or entity is less efficient at producing goods or services compared to another country or entity.

Absolute Advantage

The capacity of a person, corporation, or nation to manufacture a product or provide a service at a lower per-unit expense than any other participant in the market.

Comparative Advantage

The capability of an individual or organization to create a product or provide a service with a smaller opportunity cost than another.

Price

The amount of money required for the purchase of a good or service, reflecting the value that buyers and sellers assign to it.