Suppose That the United States and Cuba Decide to Open

question 29

Multiple Choice

Suppose that the United States and Cuba decide to open up trade. If each country specializes in the good in which it has a comparative advantage, ________ will gain from that trade because ________.

• A) both countries; consumption possibilities in both Cuba and the United States will lie outside their PPFs.
• B) neither country; their consumption possibilities will not change.
• C) only the United States; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change.
• D) only Cuba; consumption possibilities in Cuba will lie outside its PPF and U.S. consumption possibilities will not change.

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Definitions:

No-par Common Stock

A type of common stock that does not have a par value assigned, representing an ownership interest in a corporation.

Stated Value

A value assigned to a share of stock by the corporation’s board of directors, which is an arbitrary value used for accounting purposes.

Par Common Stock

The value assigned to a share of common stock in the company's charter, not indicative of the market value.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often with predetermined dividend payments.