Suppose John and Joe Each Have Different Production Possibility Frontiers;John

question 82

Multiple Choice

Suppose John and Joe each have different production possibility frontiers;John specializes in cloth and Joe specializes in corn.John's island unexpectedly has exceptionally good weather,and suddenly he is twice as productive in the production of both corn and cloth.Select the best statement.

• A)This is an example of unemployed resources becoming employed.
• B)As a result,John will have an absolute advantage in both corn and cloth.
• C)As a result,it is possible that John and Joe will switch the goods in which they specialize.
• D)There will be no change to the goods in which John and Joe specialize,because John's comparative advantage has not changed.
• E)There will be a change to the goods in which John and Joe specialize,because John's opportunity cost of corn has decreased.

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Definitions:

Bonds

Fixed income instruments that represent a loan made by an investor to a borrower, typically corporate or governmental.

Nominal Return

The amount of profit or loss realized from an investment without adjusting for factors like inflation.

Expected Inflation

The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling, as anticipated by consumers, investors, and economists.

Real Return

The rate of return on an investment after adjusting for inflation.