Use the Production Possibilities Data Below for Austria and Italy

question 108

Multiple Choice

Use the production possibilities data below for Austria and Italy to answer the following question(s) . Table 2-1
Refer to Table 2-1. Which of the following is true?

• A) Austria has the comparative advantage in both goods.
• B) Austria has the comparative advantage in food.
• C) Italy has the comparative advantage in food.
• D) It would be impossible for Austria and Italy to gain from trade.

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Definitions:

MR = MC

A condition where a firm's marginal revenue (MR) equals its marginal cost (MC), commonly used to determine the profit-maximizing level of output.

ATC

Stands for Average Total Cost, which is the cost per unit of output, calculated by dividing the total cost by the quantity produced.

Average Total Cost

The sum of all production costs divided by the quantity of output produced, synonymous with the cost per unit including all variable and fixed costs.

Long-run Equilibrium

A state in which all factors of production and costs are variable, and firms in the industry make just enough profit to stay in business.