If the Country of Zebina Has a Comparative Advantage in the Production

question 55

Multiple Choice

If the country of Zebina has a comparative advantage in the production of wheat over the country of Almia, then:

• A) the opportunity cost of producing wheat is higher in Zebina than in Almia.
• B) the opportunity cost of producing wheat is lower in Zebina than in Almia.
• C) neither Almia nor Zebina should specialize in the production of wheat.
• D) Zebina will export all of its wheat to Almia.

Analyze special orders and their impact on profitability and production capacity.

Understand the make-or-buy decision process and its implications on costs and operations.

Analyze the financial impact of accepting contracts or special pricing strategies on net operating income.

Understand the concept of opportunity cost and its application in decision-making.

---

Definitions:

Agency Approach

A mechanism used in financial management where one party (the agent) is allowed to act on behalf of another (the principal) in financial transactions or decisions.

Common Shares

Equity securities that represent ownership in a corporation, providing voting rights and entitling the holder to a share of the company’s success through dividends and/or capital appreciation.

Unamortized Premium

The portion of a bond premium that has not yet been amortized or gradually written off against earnings over the bond's life.

Wholly Owned Subsidiary

A company whose entire share capital is owned by another company, making it fully controlled by the parent company.