The Hypothetical Nations Wat and Xat Have the Production Possibilities

question 282

Multiple Choice

$$\begin{array}{l}{ ~~~~~~~~~~~~~~~~~~~~~\text { Wat's Production Possibilities } }\\\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Product } & A & B & C & D & E & F \\\hline \text { Rice } & 750 & 600 & 450 & 300 & 150 & 0 \\\hline \text { Corn } & 0 & 50 & 100 & 150 & 200 & 250 \\\hline\end{array}\\\\{ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\text { Xat's Production Possibilities } }\\\begin{array} { | l | c | c | c | c | c | c | } \hline \text { Product } & A & B & C & D & E & F \\\hline \text { Rice } & 2,500 & 2,000 & 1,500 & 1,000 & 500 & 0 \\\hline \text { Corn } & 0 & 100 & 200 & 300 & 400 & 500 \\\hline\end{array}\end{array}$$ The hypothetical nations Wat and Xat have the production possibilities for rice and corn given in the accompanying tables. Which of the following statements about the two nations is correct based on
The principle of comparative advantage?

• A) Xat should specialize in the production of corn.
• B) Wat should specialize in the production of rice.
• C) Xat has a comparative advantage in the production of rice.
• D) Xat has a comparative advantage in the production of corn.

---

Definitions:

Differential Analysis

The process of comparing the cost and revenue of different business decisions to determine which option offers the best financial outcome.

Make or Buy

A decision-making process in businesses to determine whether to produce goods internally or purchase them from an external supplier.

Operating Capacity

The maximum output that a company can produce under normal conditions over a specific period of time.

Setup

An overhead activity that consists of changing tooling in machines in preparation for making a new product.