Suppose That a Worker in Country a Can Produce Either

question 14

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 specializes in producing tomatoes and Country A specializes in producing bananas. What terms of trade would both countries be willing to agree to?

• A) One tomato for one banana
• B) One tomato for two bananas
• C) One tomato for four bananas
• D) One tomato for six bananas

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Definitions:

Conversion Cost

The combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Physical Units

A method of measuring production or inventory in terms of actual physical items or quantities.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as the beginning inventory plus purchases minus cost of goods sold.

Ending Work in Process

Refers to the items still in production and not yet ready for sale at the end of an accounting period.