Consider the Following Information About the Production of Two Goods,X

question 118

Multiple Choice

Consider the following information about the production of two goods,X and Y,in two countries,A and B: • In Country A it takes X_a units of resources to produce one unit of X and Y_a units of resources
To produce one unit of Y.
• In Country B it takes X_b units of resources to produce one unit of X and Y_b units of resources
To produce one unit of Y.
• Assume the amount of resources used to produce the goods in the two countries can be
Compared unambiguously.
TABLE 32-1
Refer to Table 32-1.Country A has an absolute advantage in producing good X if

• A)(X_a/Y_a)is less than (X_b/Y_b).
• B)X_a is less than X_b.
• C)X_a is less than Y_a.
• D)(X_a/X_b) is less than (Y_a/Y_b).
• E)X_a = X_b.

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Definitions:

Fixed Manufacturing Overhead

Indirect production costs that remain constant regardless of the level of production, such as rent, salaries of managerial staff, and property taxes.

Dropping Product

The decision made by a company to discontinue producing and selling a specific product due to factors like poor sales, strategic realignment, or cost inefficiency.

Financial Advantage

Refers to the benefits gained in financial terms, often seen as an edge over competitors or a favorable position in the market.

Special Order

A one-time customer order often involving a large quantity and possibly requiring adjustments to standard pricing or production processes.