If Kami Can Produce 40 Tablets or 30 Radios During

question 17

Multiple Choice

If Kami can produce 40 tablets or 30 radios during a month's time, while Sally can produce 10 tablets or 20 radios, then it is correct to state that

• A) Kami has a comparative advantage in producing tablets.
• B) Kami has a comparative advantage in producing both tablets and radios.
• C) Sally has a comparative advantage in producing both tablets and radios.
• D) Sally has an absolute advantage in tablets.

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Definitions:

Discounting

The process of determining the present value of a payment or series of payments that will be received in the future.

Present Value Interest Factor

A factor used to calculate the present value of a sum that is to be received in the future, accounting for the time value of money.

Non-Interest Bearing Note

A debt instrument that does not pay interest but is issued at a discount to its redemption value.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, used to assess the worth of an investment.