Two Countries Will Have Zero Incentive to Trade If Their

question 127

Multiple Choice

Two countries will have zero incentive to trade if their production possibilities curves are parallel straight lines because

• A)The opportunity costs for both countries are the same.
• B)One country has an absolute advantage in the production of both goods,thus providing that country with no incentive for trade.
• C)One country has a comparative advantage in the production of both goods,thus providing that country with no incentive for trade.
• D)An intersection of the two lines is not possible,and therefore a trade equilibrium is not possible.

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Definitions:

Fixed Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs, attributed to the variance in the volume of production.

Fixed Component

A cost or part of a cost that remains unchanged regardless of changes in the level of output or activity.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity measure, like labor hours or machine hours.

Machine-Hours

A measure of production activity that quantifies the number of hours machines are operated in the production process.