Suppose That Australia Has a Comparative Advantage Over the New

question 130

Essay

Suppose that Australia has a comparative advantage over the New Zealand in providing financial services and New Zealand has a comparative advantage over Australia in producing milk products.By reducing trade barriers, CER allowed both Australia and New Zealand to export more of the products in which it enjoys a comparative advantage.Do all people in both countries benefit from this free trade agreement? Explain.

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Definitions:

CVP Income Statement

An income statement format used in cost-volume-profit analysis, showing sales, variable costs, and the contribution margin.

Contribution Margin

The amount remaining from sales revenue after variable costs are deducted, indicating how much contributes to covering fixed costs and profit generation.

Break-Even Point

The point at which total costs and total revenue are equal, resulting in no profit or loss.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product and included in the product's cost calculation.