Which of the Following Statements Best Describes the Theory of Comparative

question 246

Multiple Choice

Which of the following statements best describes the theory of comparative advantage?

• A) The best way for a nation to ensure full employment is to be totally self-sufficient rather than relying on other nations to obtain goods and services.
• B) Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce efficiently from other nations.
• C) The nation that has the largest reserves of gold and other natural resources will enjoy a position of comparative advantage in trade relationships.
• D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold in a company, including material and labor costs.

Schedule of Cost of Goods Manufactured

A detailed report showing the total production costs incurred to produce goods in a specific accounting period.

Total Manufacturing Cost

The aggregate cost of producing goods, including direct labor, direct materials, and manufacturing overhead expenses.

Prime Costs

The direct costs directly attributable to the manufacture of goods, including direct materials and direct labor.