Comparative Advantage, Not Absolute Advantage, Determines the Decision to Specialize

question 1

True/False

Comparative advantage, not absolute advantage, determines the decision to specialize in production.

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Definitions:

Return on Assets

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

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue.

Sales

The activities involved in selling products or services, ultimately generating revenue for a business.

Decentralization

Assignment of decision-making rights to lower operating levels of an organization. Decreases cost of transferring specific knowledge needed to make decisions, but increases the cost of controlling behavior.