Why Is a Small Country More Likely to Gain from International

question 71

Multiple Choice

Why is a small country more likely to gain from international trade than a large country?

• A) Because autarkic relative prices in a small country are likely to be quite different from the world relative prices.
• B) Because a small country,unlike a large country,does not have the resources it needs to be self-sufficient.
• C) Because small countries tend to be specialized in their production,while large countries tend to be diversified.
• D) Because a small country is less likely to encounter decreasing returns to scale than is a large country.

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Definitions:

Fixed Manufacturing Overhead

Costs that do not vary with the level of production output, such as rent, salaries of supervisory staff, and equipment depreciation.

Absorption Costing

An approach in accounting that factors in every production cost, from raw materials and direct labor to both kinds of manufacturing overheads, variable and fixed, into the price of a product.

Net Operating Income

The profit generated from a company's core business operations, excluding expenses and revenues from non-operating activities.

LIFO

Last In, First Out, an inventory valuation method where the most recently produced items are recorded as sold first.