Imagine Two Countries with Identical Endowments of Resources

question 150

Multiple Choice

Imagine two countries with identical endowments of resources. Using all its resources, Broland can produce 5,000 books or 8,000 forks. Using the same resources, Nomia could produce 4,000 books or 7,000 forks. Which country has a comparative advantage producing forks?

• A) Broland, because it gives up 0.63 book for each fork produced
• B) Nomia, because it gives up 0.57 book for each fork produced
• C) Broland, because it gives up 1.6 books for each fork produced
• D) Nomia, because it gives up 1.75 books for each fork produced

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Definitions:

Promissory Note

A promise in writing, signed by the maker, to pay a sum certain in money to the person named therein, or bearer, at some fixed or determinable future time, or on demand.

Maker

In finance, the maker is the party that creates or issues a promissory note, thereby agreeing to pay a certain amount of money to a payee at a future date.

Bearer

An individual in possession of an instrument, such as a check or bond, that is not made out to a specific payee.

Certified Cheque

A cheque guaranteed by a bank, indicating that the funds are available and have been set aside for the payee.