Use the Following Scenario to Answer the Questions That Follow

question 8

Multiple Choice

Use the following scenario to answer the questions that follow.
An economy has two workers, Smith and Ricardo. Every day they work, Smith can produce 4 computers or 16 smartphones, and Ricardo can produce 6 computers or 12 smartphones.
-________ has the comparative advantage in computers and ________ has the comparative advantage in smartphones.

• A) Smith; Smith
• B) Smith; Ricardo
• C) Ricardo; Smith
• D) Ricardo; Ricardo
• E) Neither; Smith

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Definitions:

Borrower

An individual, company, or institution that receives funds from a lender under the condition of paying back the borrowed amount plus interest.

Compounded Monthly

Interest calculated monthly on the principal sum plus previously earned interest.

Equal Payments

Regularly scheduled payments of the same amount, common in loans and amortization plans.

Compounded Annually

Interest that is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan, done once a year.