Table 3-23 Assume That the Farmer and the Rancher Can Switch Between

question 71

Multiple Choice

Table 3-23
Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate.
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-Refer to Table 3-23. Without trade, the farmer produced and consumed 2 pounds of pork and 4 pounds of tomatoes and the rancher produced and consumed 4 pounds of pork and 2 pounds of tomatoes. Then, each person agreed to specialize in the production of the good in which he has a comparative advantage and trade 4 pounds of pork for 6 pounds of tomatoes. As a result,

• A)the farmer gained 3 hours worth of production and the rancher gained 4 hours worth of production.
• B)the farmer gained 4 hours worth of production and the rancher gained 6 hours worth of production.
• C)the farmer gained 6 hours worth of production and the rancher gained 8 hours worth of production.
• D)the farmer gained 8 hours worth of production and the rancher gained 10 hours worth of production.

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Definitions:

Allowance

A provision in accounting for a reduction in the value of receivables or inventories, often related to potential bad debts or damaged goods.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Classified Balance Sheet

A balance sheet that contains standard classifications or sections.

Personal Cash

Refers to the liquid assets that an individual holds for the purpose of immediate or near-term spending or investment.