According to the Principle of Comparative Advantage, Specialization and Trade

question 82

Multiple Choice

According to the principle of comparative advantage, specialization and trade increase a nation's total output because:

• A) resources are directed to their highest productivity.
• B) the output of the nation's trading partner declines.
• C) the nation can produce outside its production possibilities frontier.
• D) the problem of unemployment is eliminated.

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Definitions:

Mutually Exclusive

Conditions or options that cannot occur or be chosen at the same time, requiring a choice to be made between them.

Internal Rate

Often refers to the internal rate of return (IRR), a metric used in capital budgeting to estimate the profitability of investments.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

NPV Decision Rules

Guidelines used to determine the viability of an investment or project based on the Net Present Value, which calculates the present value of cash inflows minus the present value of cash outflows.