According to the Theory of Absolute Advantage,which of the Following

question 28

Multiple Choice

According to the theory of absolute advantage,which of the following is true of a nation with free trade?

• A) A nation gains by specializing in economic activities in which it has an absolute advantage.
• B) A nation gains absolute advantage by restricting trade with other countries.
• C) A nation gains tremendously by focusing on economic activities in which it has a comparative advantage.
• D) A nation will develop absolute advantage based on its locally abundant factors.

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Definitions:

Actual Output

The actual quantity of goods or services produced by a company within a specified timeframe.

Variable Overhead Rate

The ratio of variable overhead costs to an activity base such as units produced or direct labor-hours, used for costing purposes.

Fixed Manufacturing Overhead

Costs related to manufacturing that do not change with the level of production, such as factory rent and salaries of supervisory personnel.

Budget Variances

The differences between budgeted amounts and actual amounts.