Alpha Can Produce Either 18 Oranges or 9 Apples an Hour

question 11

Multiple Choice

Alpha can produce either 18 oranges or 9 apples an hour, while Beta can produce either 16 oranges or 4 apples an hour. Which of the following terms of trade between apples and oranges would allow both Alpha and Beta to gain by specialization and exchange?

• A) 1 orange for 0.2 apples
• B) 2 apples for 3 oranges
• C) 3 apples for 3 oranges
• D) 1 apple for 3 oranges

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Definitions:

FOB Shipping Point

A term in shipping agreements where the buyer is responsible for the goods and their transportation cost as soon as they leave the seller's premises.

Ownership of Merchandise

The legal right or title to goods and inventory held by a business for sale.

Multiple-Step Income Statement

A detailed financial statement that separates operating revenues and expenses from non-operating ones, providing insights into a company's financial activities.

Gross Profit

The difference between sales revenue and the cost of goods sold before deducting operating expenses.