If Toni Has an Absolute Advantage in Both Sewing and Ironing

question 68

Multiple Choice

If Toni has an absolute advantage in both sewing and ironing when compared to Tom,then

• A) they might benefit from trading, but we need more information to determine in which task they should specialize.
• B) neither Toni nor Tom can benefit from trading with each other.
• C) Toni should specialize in sewing, and Tom should specialize in ironing.
• D) Toni cannot benefit from trading with Tom, but Tom can benefit from trading with Toni.
• E) Tom cannot benefit from trading with Toni, but Toni can benefit from trading with Tom.

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Definitions:

Book Value

The net worth of common equity according to a firm’s balance sheet.

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and potential dividends.

Replacement Cost

The cost to replace an asset of a company at the present time, according to its current worth.

ROE

Stands for Return on Equity, a financial ratio that measures the profitability of a company in relation to shareholders' equity.