Japan Is More Efficient in the Production of Rice,and the United

question 46

Multiple Choice

Japan is more efficient in the production of rice,and the United States is more efficient in the production of oranges.In the production of rice,the United States is said to have a(n) :

• A)comparative advantage
• B)absolute disadvantage
• C)absolute advantage
• D)comparative disadvantage

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Definitions:

Cost of Capital

A company's expense for acquiring funds and capital, calculated as a weighted average of debt and equity costs.

Debt-Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity; it indicates what proportion of equity and debt the company is using to finance its assets.

Levered Firm

A company that has debt in its capital structure, showing that it finances some of its operations through borrowing.

Static Theory of Capital Structure

A theory proposing that there is an optimal capital structure for a company, balancing the benefits and costs of debt versus equity financing to maximize value.