Home Has a Comparative Advantage in Wheat, and Foreign Has

question 61

Multiple Choice

Home has a comparative advantage in wheat, and Foreign has a comparative advantage in cloth. Once trade occurs, Home produces 1,500 bushels of wheat, and Foreign produces 1,000 yards of cloth. The following table shows the amount of wheat that Home is willing to trade to acquire more cloth. Suppose that Home's trade price rose from 0.5 bushel of wheat per yard of cloth in 2009 to a bushel of wheat per yard of cloth in 2010. We conclude that the change in Home's export price means that Home was worse off in 2010 than it was in 2009. Which of the following statements best explains this conclusion?

• A) Home had to export twice as much wheat to obtain a yard of cloth in 2010 as it did in 2009.
• B) Home had to export half as much wheat to obtain a yard of cloth in 2010 as it did in 2009.
• C) Home had to export the same amount of wheat to obtain a yard of cloth in both 2009 and 2010.
• D) Home had to export three times the amount of wheat to obtain a yard of cloth in 2010 as it did in 2009.

---

Definitions:

Earnings Per Share

A financial ratio that measures the amount of net income earned per share of stock outstanding.

Current Ratio

A liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Inventory Turnover

A ratio that measures the number of times inventory is sold and replaced over a certain period, indicating the efficiency of inventory management.

Return on Assets

A financial ratio that measures the profitability of a company in relation to its total assets.