Exhibit 28-2 Karl Can Produce Either 10 Tons of Oranges

question 132

Multiple Choice

Exhibit 28-2 Karl can produce either 10 tons of oranges or 5 tons of apples in a year,while Adam can produce either 5 tons of oranges or 10 tons of apples.
Refer to Exhibit 28-2.If the exchange rate between apples and oranges in international markets is 1 ton of apples per 3 tons of oranges:

• A) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export oranges to other countries.
• B) Karl and Adam will not trade apples and oranges with one another, since both will specialize in and export apples to other countries.
• C) Karl and Adam will trade apples and oranges with one another.
• D) Karl and Adam will not specialize or engage in international trade.

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Share Capital

The total value of a company's shares of stock that have been issued to shareholders.

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The portion of net earnings not distributed as dividends to shareholders, but retained by the company to reinvest in its core business or to pay debt.

Contributed Surplus

Contributed Surplus is an equity account that reflects excess amounts received by a company over the par value of its stock from the sale of shares directly to investors.

Common Shares

Equity investments that represent ownership in a company, granting holders voting rights and a share in the company's profits through dividends.