When Does the Law of Comparative Advantage Say That a Person

question 107

Multiple Choice

When does the law of comparative advantage say that a person should produce a good?  

• A) if she has the greatest desire to consume that good 
• B) if she has the lowest opportunity cost of producing that good 
• C) if she has an absolute advantage in a related activity 
• D) if she has a comparative advantage in a related activity

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Definitions:

Capital Gains

The profit realized from the sale of a capital asset, like stocks or real estate, when the sale price exceeds the purchase price.

Interest Income

Earnings received from deposit or investment accounts, such as savings accounts, bonds, or loans.

Taxable Income

Income on which tax must be paid; total income minus exemptions and deductions.

Average Tax Rate

The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), expressing the percentage of income that goes to taxes.