(This Question Pertains to Material in Appendix A.)

question 8

Essay

(This question pertains to material in Appendix A.)
Explain why, when a country is engaged in international trade as a result of economies of scale, production may move to an endpoint of the PPF.

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Definitions:

Variable Selling Expenses

Costs that vary directly with the volume of sales, such as commissions and shipping fees.

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue is available to cover fixed expenses and to contribute to profit.

Variable Administrative Expenses

Costs that vary in proportion to changes in an organization's activity level, such as sales commissions.

Sunk Cost

A cost that has already been incurred and cannot be recovered, and hence should not influence future business decisions.