Suppose That a Worker in Country a Can Produce Either

question 118

Multiple Choice

Suppose that a worker in Country A can produce either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can produce either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Country B will benefit from trade if the country specializes in _____ because _____

• A) bananas; it has a comparative advantage at producing bananas.
• B) tomatoes; its opportunity cost of tomatoes is higher than that of Country A.
• C) tomatoes; its opportunity cost of tomatoes is lower than that of Country A.
• D) bananas; it has an absolute advantage at producing bananas.

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Definitions:

Controllable Overhead Variances

The differences between the budgeted and actual overhead costs that management can control or influence.

Volume Overhead Variances

The difference between the expected (budgeted) overhead costs based on standard volume and the actual overhead costs incurred.

Flexible Manufacturing Budget

A budget that adjusts to changes in the volume of production, providing variable costs based on different levels of activity.

Standard Cost Accounting System

A standard cost accounting system estimates the cost of production in advance, using standard costs for materials, labor, and overhead for cost control and performance evaluation.