Given the Following Information, Does a Comparative Advantage Opportunity Exist

question 21

Multiple Choice

Given the following information, does a comparative advantage opportunity exist?

• A)Yes - both parties can pay less interest by borrowing where they have a comparative advantage and swapping their interest payments.
• B)Yes - the potential savings from entering a swap are 1 per cent.
• C)Yes -but a swap would reduce the cost of funds for B only.
• D)No.
• E)Cannot say with the available information.

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Definitions:

Conscious Intentions

Mental states or plans that are formed with awareness and purpose towards carrying out an action.

John B. Watson

An American psychologist who established the psychological school of behaviorism.

Behaviorists

Psychologists who focus on observable behaviors and the ways in which learning mechanisms affect behavior.

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without any need for prior learning.