Suppose Hank and Tony Can Both Produce Corn

question 179

True/False

Suppose Hank and Tony can both produce corn. If Hank's opportunity cost of producing a bushel of corn is 2 bushels of soybeans and Tony's opportunity cost of producing a bushel of corn is 3 bushels of soybeans, then Hank has the comparative advantage in the production of corn.

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Definitions:

Put Option

A contractual agreement allowing the possessor the choice, not the duty, to dispose of a particular volume of an underlying asset at an agreed-upon rate before a certain deadline.

Strike Price

The predetermined price at which an option's holder has the right to purchase (for a call option) or sell (for a put option) the underlying asset.

Option

An option is a financial derivative that gives the holder the right, but not the obligation, to buy or sell an asset at a predetermined price within a specified timeframe.