Suppose That Labor Is the Only Productive Resource Needed

question 94

Multiple Choice

Suppose that labor is the only productive resource needed.Scotland has a comparative advantage in producing firewood,while Iceland has a comparative advantage in producing wool.If the two nations trade with each other,

• A)Scotland should export wool and Iceland should export firewood.
• B)Scotland should export both wool and firewood.
• C)Scotland should export firewood and Iceland should export wool.
• D)Iceland should export both wool and firewood.

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Definitions:

Cash Equivalent

Short-term, highly liquid investments that are easily convertible to known amounts of cash and have original maturities of three months or less.

Non-Interest-Bearing Note

A debt instrument that does not accrue interest over its life, meaning it is issued at its face value and repaid at the same amount without additional interest payments.

Market Rate

The prevailing interest rate available in the marketplace for loans and deposits, influenced by supply and demand, the central bank’s policy, and other factors.

Interest Expense

An accounting item representing the charge for the use of borrowed funds, affecting an organization's net income.