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Suppose That a Worker in Boatland Can Produce Either 5

question 2

Multiple Choice

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year,and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year.There are 10 workers in each country.Political pressure from the fish lobby in Farmland and from the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the fish industry in Farmland and the wheat industry in Boatland.As a result,Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year.If the political pressure were overcome and trade were to occur,each country would completely specialize in the product in which it has a comparative advantage.If trade were to occur,the combined output of the two countries would increase by

Definitions:

Recognized

Recognized refers to the formal acknowledgment in financial reporting that an item is included in the financial statements of a business.

Available-for-Sale Securities

Financial instruments that are purchased with the intent to sell before they reach maturity and are classified as neither held for trading nor held to maturity.

Accrued Interest

The interest that has accumulated on a bond, loan, or other financial instrument since the last interest payment was made.

Bonds

Fixed-income investments that represent loans made by an investor to a borrower, typically corporate or governmental.