Nation Alpha Has a Comparative Advantage in Product X, and Nation

question 64

Multiple Choice

Nation Alpha has a comparative advantage in product X, and nation Beta has a comparative advantage in product Y. Trade in the two products will only benefit the two nations if

• A) the exchange ratio of X for Y is fixed.
• B) the terms of trade increase in both nations.
• C) there is excess capacity in both economies.
• D) the exchange ratio for X and Y reflect their domestic opportunity costs.

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Definitions:

Working Capital Management

The managing of short-term assets and liabilities.

Current Assets

Assets that are used or converted into cash within the course of a calendar year.

Financial Managers

Those who focus on obtaining needed funds for the successful operation of an organization and using those funds to further organizational goals.