If Two Countries Have Identical Production Possibility Frontiers,then Trade Between

question 56

Multiple Choice

If two countries have identical production possibility frontiers,then trade between them is likely to be beneficial if

• A) their supply curves are identical.
• B) their cost functions are identical.
• C) their demand conditions are identical.
• D) their incomes are identical.
• E) their demand functions differ.

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Definitions:

Discounting

The process of determining the present value of future cash flows by applying a discount rate, reflecting the time value of money.

Compounding

The process in which the value of an investment increases because the earnings on an investment, both capital gains and interest, earn interest as time passes.

Effective Annual Rates

The interest rate on a loan or financial product restated from the nominal rate as an annual rate that accounts for compounding over a given period.

Compounding Periods

The frequency with which interest is added to the principal balance of an investment, affecting the total interest earned or paid.