In the Following Classical-Type Table Showing the Output Per 10-Days

question 28

Multiple Choice

In the following Classical-type table showing the output per 10-days of labor input in each of the two commodities in each of the two countries,
$$\begin{array} { l l l } &\underline{ \text { Cameras }} &\underline{ \text { Wine }} \\\text { France } & 100 \text { units } & 40 \text { units } \\\text { Germany } & 150 \text { units } & 50 \text { units }\end{array}$$

• A) Germany has a comparative advantage in both goods.
• B) France has an absolute advantage in both goods.
• C) France has a comparative advantage in cameras.
• D) the pretrade price ratio in France is 1 wine = 2.5 cameras.

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Definitions:

Absorption Costing

A strategy in accounting where the cost of a product encompasses all the production expenses: direct materials, direct labor, and manufacturing overheads, regardless of them being fixed or variable.

Net Operating Income

An indicator of a firm's earnings derived solely from its principal business activities, without accounting for interest and tax expenses.

Last Year

Refers to the previous calendar or fiscal year.

Absorption Costing

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