Table 19-12
Output Per Hour Production and Production
of Work

question 429

Multiple Choice

Table 19-12
Output per hour Production and Production
of work Consumption without Trade with Trade
$\begin{array}{|c|c|c|c|c|c|c|}\hline & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } & \text { Swords } & \text { Belts } \\\hline \text { Estonia } & 5 & 3 & 100 & 40 & 200 & 0 \\\hline \text { Morocco } & 2 & 2 & 60 & 60 & 0 & 120 \\\hline\end{array}$ Estonia and Morocco can produce both swords and belts. Each country has a total of 40 available labor hours for the production of swords and belts. Table 19-12 shows the output per hour of work, the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 19-12.If the actual terms of trade are 1 belt for 1.5 swords and 50 belts are traded,how many swords will Estonia consume?

• A) 75
• B) 100
• C) 125
• D) 200

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Definitions:

Miller Model

A theory on capital structure that extends the Modigliani-Miller theorem by including corporate taxes but excluding bankruptcy costs.

Leverage Gain

The increase in potential returns to an investor achieved by using borrowed funds or financial derivatives.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements; it represents the compensation the market demands in exchange for owning the asset and bearing the risk of ownership.

Capital Structure

The composition of a company’s debt and equity used to finance its overall operations and growth.