Suppose There Are Only 2 Nations, Atlantis and Pacifica, and Only

question 69

Multiple Choice

Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 75 per day. If Pacifica produces only surfboards, it can make 75 per day. If Pacifica produces only kayaks, it can make 75 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks.

• A) Atlantis; Atlantis
• B) Pacifica; Pacifica
• C) Atlantis; Pacifica
• D) Pacifica; Atlantis

---

Definitions:

Risky Portfolio

An investment portfolio that consists of assets with higher levels of risk, with the potential for higher returns.

Geometric Average Return

The average rate of return on an investment, calculated by multiplying n returns together and then taking the nth root.

Quarterly Returns

The investment gains or losses experienced by an asset or portfolio over a three-month period.

Geometric Average Return

A method of calculating the average rate of return that accounts for the compounding of returns over time.