If France Is Capable of Producing Either Cheese or Wine

question 39

Multiple Choice

If France is capable of producing either cheese or wine or some combination of those two products,then France should:

• A) produce the one it is more efficient at producing.
• B) produce the one for which it has a comparative advantage.
• C) produce the one for which it has a higher opportunity cost.
• D) remain self-sufficient if it has the absolute advantage in the production of both.

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Definitions:

Expected Return

The forecasted percentage return on an investment, accounting for all possible returns and their probabilities.

Currently Available Information

The latest and most up-to-date data or facts that are accessible and can be used for decision-making processes.

SML

Security Market Line, a graphical representation of the expected return of investments as a function of their risk, as measured by beta.

Vertical Intercept

The point where a graphed line crosses the vertical axis, often used in mathematical functions to determine a starting point.