The Morel Is a Prized Mushroom That Is Often Abundant

question 25

Multiple Choice

The morel is a prized mushroom that is often abundant in the Western United States in years after forest fires. Suppose two companies are buying morels from workers willing to find them. One company offers to pay workers $5.00 per pound, and the other company will pay workers only $4.00 per pound. Economists would say that:

• A) the company willing to pay only $4.00 has a comparative advantage in selling morels.
• B) the higher-paying company will attract the more creative and innovative pickers and the lower-paying company will attract the others.
• C) the lower-paying company will attract the more creative and innovative pickers and the higher-paying company will attract the others.
• D) this situation violates the law of one price and is not likely to persist.

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Definitions:

Machine Hour

A measure of production time, indicating the hours a machine is in operation.

Activity-Based Costing

A costing methodology that assigns overhead and indirect costs to related products and services based on the activities they require.

Overhead Cost

The ongoing expenses of operating a business that are not directly tied to the production of goods or services, such as rent and utilities.

Product Line

A group of related products under a single brand sold by the same company.