If Nations Begin to Specialize in Production for the Purpose

question 192

Multiple Choice

If nations begin to specialize in production for the purpose of trade,

• A)the utility from consumption will increase, but not the total output.
• B)total world output will increase, as well as well-being from consumption.
• C)total world output will increase, but well-being from consumption will not.
• D)neither total output nor well-being from consumption will change.
• E)the impact on total output and well-being cannot be predicted.

---

Definitions:

Capital Asset Pricing Model

A theoretical framework used to determine the expected return on an investment by accounting for its inherent risk, usually represented as the risk-free rate plus the risk premium.

Risk Premium

Maximum amount of money that a risk-averse individual will pay to avoid taking a risk.

Expected Return

The predicted average of possible returns for an investment, accounting for the probability of each outcome and its associated return.

Risk-Adjusted Discount Rate

A discount rate that adjusts for the risk of the cash flows, giving a more accurate present value estimate.