The Rybczynski Theorem Asserts That in a Two-Good Model, and Assuming

question 29

Multiple Choice

The Rybczynski theorem asserts that in a two-good model, and assuming that product prices stay constant, growth in the endowment of one factor of production with the other factor remaining unchanged, will result in:

• A)an equal increase in the output of both goods.
• B)an increase in the output of the good that uses the growing factor intensively and a decrease in the output of the other good.
• C)an increase in the output of both goods but a relatively greater increase in the output of the good that uses the growing factor intensively.
• D)an increase in the output of the good that uses the growing factor intensively, but the output level of the other good will remain unchanged.

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Definitions:

Predetermined Overhead Rate

The rate used to allocate manufacturing overhead costs to products, computed before the period begins based on estimated costs and activity levels.

Direct Labor-Hours

Full count of working hours by employees in direct connection with the production process.

Job Cost Sheet

A document that records the materials, labor, and manufacturing overhead costs assigned to each individual job.

Machine-Hours

A unit of measure reflecting the amount of time a machine is operated, used in cost accounting and operational management to allocate machine costs to products.