Answer:
<em>Countries will completely specialize in the product in which they have a comparative advantage if free trade is allowed to occur. ( first choice)</em>
Answer:
If Mary and Tim specialize in the good in which they have a comparative advantage, ______.
Mary would specialize in making cakes while Tim would specialize in making pies.
Explanation:
a) Data and Calculations:
Mary's opportunity cost of making a cake = 2 pies
She can make additional 5 (10/2) cakes instead of making pies
This will increase her cakes to 25 a day (20 + 5)
Tim's opportunity cost of making a cake = 4 pies
She can make additional 40 pies (10 * 4) instead of making cakes
This will increase her pies to 60 pies a day (20 + 40)
When they specialize there will be 25 cakes and 60 pies produced in a day instead of 30 cakes and 30 pies.
Answer:
PV(after-tax net return in 7th year) = 70.55 (Approx)
Explanation:
Given:
Number of year = 7
Pre-tax net returns (Fn) = $100
Growth rate = 4% = 0.04
Inflation = 3% = 0.03
Marginal tax rate = 30% = 0.3
Discount rate = 10% = 0.1
Computation:
Fn = Fo(1+g)ⁿ = 100(1.04)⁷
Fn = 131.6
Nominal net returns = 131.6(1.03)⁷
Nominal net returns = 161.85
After tax return = 161.85 (1 - 0.3)
After tax return = 113.30
After-tax, risk adjusted discount rate = 0.1(1-0.3) = 7%
PV(after-tax net return in 7th year) = 113.30
(1+0.07)⁻⁷
PV(after-tax net return in 7th year) = 70.55 (Approx)