Figure 11-14 Figure 11-14 Shows the Optimal Input Combinations

question 67

Multiple Choice

Figure 11-14 Figure 11-14 shows the optimal input combinations for the production of a given quantity of cotton in the United States and in China.
-Refer to Figure 11-14. Consider the following statements:
a. For each country, the marginal product per dollar spent on labor equals to the marginal product per dollar spent on capital.
b. The price of labor is relatively higher in the United States than in China and the price of capital is relatively lower in the United States than in China.
c. The price of labor and the price of capital are relatively higher in the United States than in China.
Based on the figure, which of the statements above is true?

• A) All of the statements are true.
• B) statements a and c only
• C) statements a and b only
• D) statements b and c only

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Definitions:

Total Cost

The complete cost of production, including both fixed and variable costs.

Total Fixed Cost

The sum of all costs that do not change with the level of production or sales over a certain period.

Indirect Manufacturing Cost

Costs related to the production of goods that cannot be directly tied to a specific product, such as factory overhead.

Standard Cost Formula

A calculated estimate of the expected cost of production, including direct labor, materials, and overhead, used for budgeting and variance analysis.