Scenario 20.2 Suppose Labor Productivity Differences Are the Only Determinants of Comparative

question 62

Multiple Choice

Scenario 20.2
Suppose labor productivity differences are the only determinants of comparative advantage, and both Egypt and produce only corn and cocoa. In Egypt, 10 bushels of corn or 15 pounds of cocoa can be produced in a day. In Ghana, one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
-Refer to Scenario 20.2. Ghana will be willing to trade cocoa for Egyptian corn if in the international market, 1 pound of cocoa can be exchanged for:

• A) more than one-eighth of a bushel of corn.
• B) less than one-sixth of a bushel of corn.
• C) more than one-fourth of a bushel of corn.
• D) less than one-fifth of a bushel of corn.
• E) more than one-tenth of a bushel of corn.

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Definitions:

Treasury Bill Rate

The Treasury bill rate is the yield or return on investment for U.S. government debt securities known as Treasury bills, which have short-term maturities.

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The return a company needs to generate to compensate its equity investors, often calculated using models like the Capital Asset Pricing Model (CAPM).

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Initial Cost

The original expenditure for purchasing an asset or starting a project, excluding maintenance or operating costs.