Michael Can Produce the Following Combinations of X and Y

question 52

Multiple Choice

Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. Vernon can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. It follows that

• A)Michael has the comparative advantage in producing X and Vernon has the comparative advantage in producing Y.
• B)Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X.
• C)Neither Michael nor Vernon has a comparative advantage in producing X.
• D)Neither Michael nor Vernon has a comparative advantage in producing Y.

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Definitions:

Straight-Line Amortization

A method of allocating the cost of an intangible asset over its useful life in equal installments.

Cash Paid Out

Money that is spent or disbursed by a business, often related to operating expenses, purchasing assets, or repaying liabilities.

Current Calendar Year

The period from January 1 to December 31 of the present year, used for financial and administrative purposes.

Selling Bonds at a Discount

This occurs when bonds are sold for less than their face value, often due to the prevailing interest rates being higher than the bond's coupon rate.