If a Nation Does Not Have an Absolute Advantage in Producing

question 87

Multiple Choice

If a nation does not have an absolute advantage in producing anything, it

• A)has no comparative advantage either.
• B)will have a comparative advantage in the activity in which it is least inefficient.
• C)will try to get along without trade.
• D)will export raw materials and import finished products.

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Definitions:

Absorption Costing Income Statement

An income statement where all manufacturing costs, both variable and fixed, are treated as product costs, with non-manufacturing costs treated as period costs.

Variable and Fixed Costs

Variable costs change based on production levels, while fixed costs remain constant regardless of production volume.

Fixed Factory Overhead Costs

Expenses related to the operation of a manufacturing facility that remain constant regardless of the production volume.

Absorption Costing

A method of inventory costing that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.