When Comparative Advantage Is Based on Transferable Factors, the Law

question 29

Multiple Choice

When comparative advantage is based on transferable factors, the law of one price tends to:

• A) erode the advantage away.
• B) amplify the advantage.
• C) stabilize the advantage.
• D) make the advantage into an inherent comparative advantage.

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Definitions:

Materials Ledger

A financial record in an inventory system that records the quantities and costs of materials on hand and used.

Subsidiary Ledger

A detailed ledger containing all of a particular account's transactions, feeding into and supporting a main accounting ledger.

Job Order Cost System

An accounting system that assigns costs to specific production batches or jobs and is used in situations where items are distinct and made to order.

Underapplied Overhead

A situation where the allocated factory overhead for a period is less than the actual overhead costs incurred, indicating that the costs have been underallocated.