If Labor in Mexico Is Less Productive Than Labor in the United

question 96

Multiple Choice

If labor in Mexico is less productive than labor in the United States in all areas of production,

• A)then neither nation can benefit from trade.
• B)then Mexico can benefit from trade but the United States cannot.
• C)then the United States will have a comparative advantage relative to Mexico in the production of all goods.
• D)then both Mexico and the United States still can benefit from trade.

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Definitions:

WACC

The Weighted Average Cost of Capital, a calculation of a firm's cost of capital that weighs each category of capital proportionately.

After Taxes

The net amount remaining following the deduction of all applicable taxes, often used to assess the true profitability of a business activity or investment after federal, state, and other taxes have been considered.

Beta Coefficient

A gauge for assessing the risk or fluctuation level of a security or portfolio in relation to the entire market.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, typically represented by government bonds.