If Ecuador Has an Absolute Advantage in Coffee and Argentina

question 73

Multiple Choice

If Ecuador has an absolute advantage in coffee and Argentina in wheat,then,according to trade theory

• A) Ecuador should focus production on coffee and trade for other goods.
• B) Ecuador would do well to produce its own wheat rather than import it from Bolivia.
• C) Argentina should focus on producing coffee and trade for wheat.
• D) there will be a perfect trade balance between the two countries.
• E) the gains in trade by both countries will be equal.

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Definitions:

Leverage

The use of debt to increase the return on an investment.

Accounts Receivable Turnover

A financial ratio that measures how efficiently a company uses its assets by calculating the number of times average accounts receivable are collected during a specific period.

Acceleration

The rate at which the velocity of an object changes over time, including increases and decreases in speed or changes in direction.

Preceding Year

The year that immediately comes before the current year in a chronological sequence.