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

question 136

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.Now suppose that Home has the opportunity to trade with Foreign
At an international price of corn equal to a ton of wheat per ton of corn.
In which product will Home find its comparative advantage?

• A)wheat
• B)corn
• C)Home will find its competitive advantage in neither corn nor wheat.
• D)Home will find its competitive advantage in both corn and wheat.

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Definitions:

Deposit

A sum of money placed in an account or paid as a part of a transaction to demonstrate commitment or reserve something.

Present Values

The valuation at the moment of money expected in the future or regular cash flows, when discounted using a certain rate of return.

Future Value

The value of an investment at a specific future date, accounting for factors like interest rates and compound interest.

Present Value Factor

A multiplier used to determine the present value of a future amount of money or stream of cash flows.