Suppose That a Worker in Caninia Can Produce Either 2

question 56

Multiple Choice

Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by

• A)15 blankets and 35 meals.
• B)25 blankets and 40 meals.
• C)35 blankets and 45 meals.
• D)50 blankets and 80 meals.

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Definitions:

Annuity

A financial product that pays out a fixed stream of payments to an individual, often used as part of retirement strategies.

Times Interest Earned

A metric assessing a firm's capability to fulfill its debt requirements using its earnings prior to interest and taxes.

Market Rate

Market rate is the common or prevailing price level for goods, services, or financial instruments in a specific marketplace.

Contract Rate

The agreed-upon price or interest rate specified within a contract.