It Pays for People to Specialize and Trade with Each

question 26

Multiple Choice

It pays for people to specialize and trade with each other because

• A)otherwise they would not survive.
• B)they can take advantage of the fact they have an absolute advantage in the production of something.
• C)this way they can consume outside their production possibilities frontier.
• D)this way the strong can exploit the weak.
• E)all of the above.

---

Definitions:

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, labor, and both variable and fixed overhead - in the cost of a product.

Net Operating Income

An entity’s income after all operating expenses have been deducted from total revenue, excluding taxes and interest charges.

Variable Costing

A costing method in which fixed manufacturing overhead is not assigned to the product, but rather treated as an expense of the period.

Absorption Costing

is an accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.