If the Opportunity Cost of Producing a Ton of Coffee

question 14

Multiple Choice

If the opportunity cost of producing a ton of coffee in the U.S. is twenty tons of rice, while the opportunity cost of producing a ton coffee in Costa Rica is four tons of rice and the terms of trade is ten tons of rice delivered per ton of coffee received,

• A)the U.S. can benefit by trading rice to Costa Rica for coffee.
• B)Costa Rica can benefit by trading rice to the U.S. for coffee.
• C)Costa Rica can benefit by trading coffee to the U.S. for rice.
• D)the U.S. can benefit by trading rice to Costa Rica for coffee and Costa Rica can benefit by trading coffee to the U.S. for rice.

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Definitions:

Marginal Tax Rate

The tax rate that applies to the last dollar of the taxpayer's income or the next dollar of taxable income earned.

Net Investment

Total amount spent on acquiring, maintaining, or improving capital assets, minus any sales of these assets.

Marginal Tax Rate

The rate of tax applied to the last dollar of income, representing the percentage of tax paid on additional income.

Salvage Value

The projected value at which an asset can be sold upon reaching the end of its operational lifespan.