Suppose That a Worker in Agland Can Produce Either 10

question 49

Multiple Choice

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year,and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year.There are 10 workers in Agland and 20 workers in Zenland.Currently the two countries do not trade.Agland produces and consumes 50 units of grain and 10 units of incense per year.Zenland produces and consumes 100 units of grain and no incense per year.The combined output of the two countries is therefore 150 units of grain and 10 units of incense per year.If the two countries decided to trade and completely specialize in producing the good for which each has a comparative advantage,what would the combined yearly output of the two countries be

• A)50 units of grain and 40 units of incense
• B)200 units of grain and 150 units of incense
• C)150 units of grain and 20 units of incense
• D)100 units of grain and 300 units of incense

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Definitions:

Machine-Hours

A unit of measure representing the operating time of machines used in the production of goods.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a specific activity base.

Manufacturing Overhead

Indirect costs related to manufacturing, such as utilities, maintenance, and salaries for managers, not directly involved in production.

Variable Manufacturing Overhead

Costs in the production process that vary with the level of output, such as utilities for machinery.