In One Hour John Can Produce 20 Loaves of Bread

question 57

Multiple Choice

In one hour John can produce 20 loaves of bread or 8 cakes. In one hour Phyllis can produce 30 loaves of bread or 15 cakes. Which of the following statements is true?

• A) Phyllis has an absolute advantage in both goods.
• B) Phyllis has a comparative advantage in producing both cakes and bread.
• C) John has an absolute advantage in both goods.
• D) John has a comparative advantage in producing cakes.
• E) Phyllis has a comparative advantage in producing bread.

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Definitions:

Cash Inflows

Money received by a business from its operations, investments, or financing activities.

Discount Factor

A multiplier used to calculate the present value of future cash flows; reflects the time value of money.

Invested Today

Refers to the allocation of resources, such as capital or time, in the present with the expectation of future returns.

Guaranteed Rate

An interest rate or return that is promised by a lender or issuer to an investor for a fixed period.