Ithilium, a European Country, Is Able to Produce More Electronics

question 43

Multiple Choice

Ithilium, a European country, is able to produce more electronics than Kilim, a North American country, even though both countries use the same amount of resources. Given this information, it can be deduced that Ithilium has a(n) :

• A) comparative advantage over Kilim.
• B) higher trade surplus than Kilim.
• C) absolute advantage over Kilim.
• D) higher balance of payments surplus than Kilim.

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Definitions:

Absorption Costing

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

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in unit product costs.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a profit or loss.

Variable Costing

An accounting method that considers only variable costs as product costs and treats fixed costs as period costs that are expensed in the period incurred.