The Principle of Comparative Advantage

question 25

Multiple Choice

The principle of comparative advantage

• A)applies only when the gold standard is in effect.
• B)is the basic reason that the United States has been running trade deficits.
• C)states that it is advantageous to export more than you import.
• D)states that total output is greatest when each product is made by the country that has the lowest opportunity cost.

Realize the importance of expected future cash flows in the valuation of financial assets.

Understand the effect of changes in required rates of return on stock valuation using the dividend growth model.

Understand the core aspects of Porter's Five Forces Model and its application to evaluating competition.

Identify elements of the value chain analysis and its role in identifying a company's core competencies.

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Definitions:

Bond Premium

When a bond's selling price surpasses its original issued cost, known as its face value.

Annual Interest

The amount of interest charged or earned over a year on borrowed capital or investment principal.

Present Value

The contemporary financial worth of a future sum or ongoing cash flows, evaluated at a designated rate of return.

Compounded Annually

A method of calculating interest where the interest earned each year is added to the principal, and the interest for the next year is calculated on the total amount.