Question

1) Which of the following statements is the best description of absolute advantage?

a) Each nation should produce these goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce as efficiently as the nations that can.

b) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.

c) The best way for a nation to ensure full employment is to be completely self-sufficient and not at all reliant on trading with other nations.

d) The nation that has the largest reserves of gold and other highly valued natural resources will enjoy a position of comparative advantage in trade relationships.

2) Dividends on preferred stock are

a) guaranteed, except in the event of bankruptcy

b) normally fixed, if and when dividends are paid

c) always greater than dividends on common stock

d) paid after common stockholders receive their dividends

Answer 1

1. Answer:- a
Reason:- Absolute advantage means when one country produces the goods in whose production it has more advantage over other country and buys the remaining goods from other countries in which it does not have more efficiency than other countries.

2. Answer:- a
Reason:- preferred stock holders enjoy preferential rights In terms of payment of dividend over ordinary share holders. Hence, the dividends are guaranteed except in the event of bankruptcy.