Assume That Australia Has a Comparative Advantage Over France in the Production

question 20

Multiple Choice

Assume that Australia has a comparative advantage over France in the production of pencils, and that France has a comparative advantage over Australia in the production of haircuts. What is a practical reason why Australia and France might NOT trade?

• A) The high transportation costs for travel between the countries might discourage trade in haircuts.
• B) Given current communication technologies, it is unlikely that people in one country could learn of the hairstyles available in the other country.
• C) Pencils are very fragile and are likely to be damaged during shipment.
• D) Australian pencil makers might resist the import of pencils into Australia even though comparative advantage indicates Australia should import pencils.

---

Definitions:

Short-term Pension Risk Ratio

A measure assessing the risk associated with a pension plan's ability to meet its short-term obligations.

Funded Status

A measure of the financial health of a pension plan, calculated as the difference between plan assets and liabilities.

Capital Constraints

Limitations that businesses face due to the scarcity of financial resources for investment.

Defined Benefit Pension Plans

Retirement plans where an employer promises a specified pension payment upon retirement, based on the employee's earnings and years of service.