Table 3-3 -Refer to Table 3-3

question 9

Multiple Choice

Table 3-3
$\begin{array}{|l|c|c|c|c|}\hline&\text { Hours needed to make one unit of: }&&\text { Amount produced in } 2400 \text { hours: }\\\hline & \text { Cars } & \text { Aeroplanes } & \text { Cars } & \text { Aeroplanes } \\\hline \text { US } & 40 & 160 & 60 & 15 \\\hline \text { Europe } & 50 & 150 & 48 & 16 \\\hline\end{array}$
-Refer to Table 3-3.If the US and Europe trade according to the principle of comparative advantage, the US will export what product to Europe?

• A)cars
• B)both aeroplanes and cars
• C)aeroplanes
• D)the US should buy both products from Europe

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Definitions:

Risk Aversion

The reluctance of a person to accept a bargain with an uncertain payoff rather than another bargain with a more certain, but possibly lower, payoff.

High-Beta Stocks

Stocks with a beta value higher than 1, indicating they are more volatile than the overall market and potentially offering higher returns.

Yield Curve

The yield curve is a graphical representation showing the relationship between the interest rates of bonds (usually government bonds) of different maturities.

Security Market Line

A representation of the relationship between the risk of an investment and its expected return, used in the Capital Asset Pricing Model.