Assume That Two Countries (Home and Foreign) Each Produce Two

question 137

Multiple Choice

Assume that two countries (Home and Foreign) each produce two goods
(corn and wheat) under constant cost production.Home produces 0.5
Ton of corn or a ton of wheat with a day of labor.Without trade (in
Autarky) , Home's daily production is 20 tons of wheat and 10 tons of
Corn.Suppose that, after trade occurs, the international price actually
Becomes 1.5 tons of wheat per ton of corn.Which of the following
Statements is TRUE?

• A)Home will gain from trade but Foreign will not.
• B)Foreign will gain from trade but Home will not.
• C)Neither home nor Foreign will gain from trade.
• D)Both Home and Foreign will gain from trade.

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Definitions:

Accounts Payable

Obligations a business has to its creditors, arising from the purchase of goods and services on credit.

Perpetual Inventory System

A system for accounting inventory that instantly captures the transactions of buying or selling via computerized point-of-sale systems and software for enterprise asset management.

Gross Method

An accounting practice where purchases are recorded at their full invoice price without deducting discounts that may later be received.

Merchandise

Goods that are bought and sold within a retail or wholesale environment, comprising the primary source of revenue for merchandising companies.