Consider the Following Information About the Production of Two Goods

question 30

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 Xa units of resources to produce one unit of X and Ya units of resources to produce one unit of Y.
∙ In Country B it takes Xb units of resources to produce one unit of X and Yb 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. If Xa is less than Xb, we can conclude with certainty that

• A) The opportunity cost of producing good X in Country A is less than in Country B.
• B) Country A has a comparative advantage in the production of good X.
• C) Country A has an absolute advantage in the production of good X.
• D) The price of good X in Country A is less than the price in Country B.
• E) The opportunity cost of producing good X in Country A is higher than in Country B.

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Definitions:

Misleading

Presenting information in a way that creates a false impression or misconstrues facts, often to deceive.

Overproduction

Overproduction occurs when more goods are produced than are demanded by the market, often leading to excess inventory and wastage of resources.

Lost Sales

Revenue that was not earned due to an inability to meet customer demand or because the customer chose a competitor's product.

Customer Dissatisfaction

Negative feelings or a state of disappointment experienced by customers when products or services fail to meet their expectations.