If Country a Has a Comparative Advantage in the Production

question 55

Multiple Choice

If Country A has a comparative advantage in the production of good X relative to Country B,

• A)we do not have enough information to say anything about relative opportunity costs.
• B)then Country A also has an absolute advantage in the production of this good.
• C)then the opportunity cost of producing X in Country A is higher than in Country B.
• D)then Country A also has an absolute advantage in the production of some good other than X.
• E)then the opportunity cost of producing X in Country A is lower than in Country B.

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Definitions:

Variable Production Costs

Expenses that change in direct proportion to the level of production output.

Cost-Volume-Profit Analysis

An accounting method used to determine how changes in costs and volume affect a company's operating income and net income.

Contribution Format

An income statement format that separates fixed and variable costs, showing the contribution margin which covers fixed costs and profits.

Absorption Costing

A bookkeeping strategy that encompasses all production expenses, including direct materials, direct labor, and variable plus fixed overhead, into the pricing of a product.