Reference no: EM132298265

Use the following information to answer the next two questions.

1. Canadian manufacturers are able to produce either 15 tons of steel (S) or 20 tons of aluminum (A) in an hour. British manufacturers can produce either 18 tons of steel or 25 tons of aluminum in an hour. The theory of comparative advantage suggests that Canada should specialize in producing steel.

True

False

2. Which of the following terms of trade would result in the exchange of goods between Canada and the UK?

S=1.41A

A=.70S

S=1.28A

A=.77S

none of the above

3. MNO (Japanese firm) is considering investing in a four year project that costs 22 million yen. MNO expects to receive 7 million yen and 20,000 pesos each year the project is in operation. The expected yen/peso exchange rate for each of the next four years is ¥5.5/peso in year one, ¥5.25/peso in year two, ¥6/peso in year three and ¥4.5/peso in year four. Find the net present value of the project (in yen) if the appropriate discount rate is 15%. Round intermediate steps to four decimals and your final answer to two decimals. Do not use currency symbols when entering your response.

4. Agency costs are generally higher for purely domestic firms as compared to multinational corporations.

True

False

5. All else being equal, a country could increase tariffs as a means to increase its balance of trade.

True

False