Tom and Jerry Have Two Tasks to Do All Day

question 80

Multiple Choice

Tom and Jerry have two tasks to do all day: set traps and build bombs.If Tom spends all day setting traps,he will have set 16 traps.If he instead devotes his day to building bombs,Tom will build 4 bombs.If Jerry spends his day setting traps,he will set 14 traps;if he spends the day building bombs,he will build 7 bombs.Jerry has a comparative advantage in:

• A)trap production because he has the lower opportunity cost of a trap.
• B)trap production because he has the higher opportunity cost of a trap.
• C)bomb production because he has the lower opportunity cost of a bomb.
• D)bomb production because he has the higher opportunity cost of a bomb.

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Definitions:

Stock Price

Stock price is the cost of purchasing a share of a company's stock, reflecting the market's valuation of the company at any given time.

Hedge Ratios

Ratios used to optimize hedging strategies by comparing the quantity of a position protected against the total position size.

Long Call Positions

An investment strategy where an investor buys call options to profit from an anticipated increase in the price of the underlying asset.

Long Put Positions

An investment strategy where an investor purchases put options betting that the underlying asset will decrease in value.