Scenario 20.2 Suppose Labor Productivity Differences Are the Only Determinants of Comparative

question 45

Multiple Choice

Scenario 20.2
Suppose labor productivity differences are the only determinants of comparative advantage, and both Egypt and Ghana produce only corn and cocoa. In Egypt, 10 bushels of corn or 15 pounds of cocoa can be produced in a day. In Ghana, one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
-Refer to Scenario 20.2. Ghana will be willing to trade cocoa for Egyptian corn if, in the international market, 1 pound of cocoa can be exchanged for:

• A)more than 0.125 of a bushel but less than 0.150 of a bushel of corn.
• B)less than 0.12 of a bushel of corn.
• C)more than 0.25 of a bushel but less than 0.66 of a bushel of corn.
• D)less than 0.02 of a bushel of corn.
• E)more than 0.1 of a bushel but less than 0.2 of a bushel of corn.

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Definitions:

Flexible Budget

A budget designed to change in response to variations in volume or activity levels.

Food

A substance consumed by living organisms to provide nutritional support, primarily obtained through plants, animals, or fermentation.

Supplies

Items used in the operation of a business or manufacturing process, which are not directly associated with the products being made.

Net Operating Income

The financial metric that calculates a company's profitability from its normal business operations, deducting operating expenses from the revenue.