The First Example Used to Explain Comparative Advantage Used Two

question 176

Multiple Choice

The first example used to explain comparative advantage used two countries (England and Portugal) and two goods (wine and cloth) to show that

• A)each country would be better off from trade if it had an absolute advantage in producing one of the goods.
• B)each country would have a comparative advantage in the production of the good for which it had an absolute advantage.
• C)mutually beneficial trade was possible between two countries even if one had an absolute advantage in the production of both goods.
• D)mutually beneficial trade was possible between two countries even if one had a comparative advantage in the production of both goods.

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Definitions:

Bad Debts

Accounts receivable that a company does not expect to collect and writes off as a loss.

Credit Policy

The guidelines a company follows to determine the creditworthiness of its customers and the terms and conditions of credit it will extend to them.

Bad Debts

Amounts owed to a company that are written off as uncollectible, typically from customers who fail to pay their invoices.

Credit Policy Relaxation

The act of making a company's criteria for extending credit more lenient, aiming to boost sales at the risk of higher bad debts.