Consider the Following Information About the Production of Two Goods,X

question 26

Multiple Choice

Consider the following information about the production of two goods,X and Y,in two countries,A and B:
∙ In Country A it takes X_a units of resources to produce one unit of X and Y_a units of resources to produce one unit of Y.
∙ In Country B it takes X_b units of resources to produce one unit of X and Y_b units of resources to produce one unit of Y.
∙ Assume the amount of resources used to produce the goods in the two countries can be compared unambiguously.
-Refer to Table 32-1.If the ratio / is less than the ratio / ,then we can say with certainty that

• A)The opportunity cost of producing good X in Country A is less than in Country B.
• B)Country A has a comparative advantage in the production of good X.
• C)Country A has an absolute advantage in the production of good X.
• D)The opportunity cost of producing good X in Country A is higher than in Country B.
• E)Both A and B are correct.

---

Definitions:

Risk Premium

The additional return required by an investor for tolerating a higher level of risk compared to a safe investment.

Market Risk

The possibility for investors to experience losses due to factors that affect the overall performance of the financial markets.

Total Risk

The complete spectrum of all types of risk that an investment or project could potentially face, including both systematic and unsystematic risks.

Expected Return

The expected return is the average return expected on an investment over a period.