An Automobile Company Has Two Factories, One in Vietnam and One

question 60

Multiple Choice

An automobile company has two factories, one in Vietnam and one in Australia, each with the same number of workers. The Vietnamese factory can produce either 150 engines or 100 transmissions per day. The Australian factory can produce either 100 engines or 75 transmissions per day.

• A)The Vietnamese factory has a comparative advantage producing both engines and transmissions.
• B)The Australian factory has an absolute advantage in the production of transmissions.
• C)The Vietnamese factory has a comparative advantage in the production of transmissions.
• D)The Australian factory has a comparative advantage in the production of transmissions.

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Definitions:

Capital Stock

The total amount of stock that a company is authorized to issue, representing ownership in the company.

Cumulative Preferred Stock

Preferred stock that, if the corporation doesn’t pay the specified percentage, has the unpaid amount (the dividend in arrears) carried over to the following year or years.

Capital Stock

The total amount of shares that a corporation is authorized to issue to shareholders, representing the primary source of equity financing for the company.

Cumulative Preferred Stock

A type of preferred stock that entitles the shareholder to receive dividends that were missed in the past before any dividends are paid to common stock shareholders.