Egypt Has a Comparative Advantage in the Production of Linen

question 53

Multiple Choice

Egypt has a comparative advantage in the production of linen and an absolute advantage in the production of beer, compared to Russia. If these two countries decide to trade, what would the pattern of trade be?

• A) Egypt would export linen to Russia.
• B) Russia would export linen to Egypt.
• C) Egypt would export both beer and linen to Russia.
• D) Russia would export both beer and linen to Egypt.

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Definitions:

Discount Rate

The discount rate applied in DCF analysis for calculating today's value of future cash flows.

Salvage Value

The projected value of an asset upon reaching the end of its operational lifespan.

Net Present Value

A valuation method that calculates the current worth of a project or investment based on its estimated future cash flows, discounted back to the present.

Profitability Index

A financial metric used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.