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

question 59

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 Australian factory has an 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 engines.
• D)The Australian factory has a comparative advantage in the production of engines.

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Definitions:

Keynesian

Relating to the economic theories of John Maynard Keynes, focusing on how aggregate demand influences economic output and inflation.

Classical Economic Systems

An economic framework based on free markets, limited government intervention, and the belief in the efficiency of market outcomes as guided by invisible hand principles.

Economy

A system of production, distribution, and consumption of goods and services within a particular geographical area.

Full Employment GDP

The output level produced in an economy when labor resources are fully employed, but not over-employed.