Iowa Produces a Small Amount of Wool but Buys a Large

question 188

Multiple Choice

Iowa produces a small amount of wool but buys a large quantity of wool from Montana for use in its (Iowa's) textile industry.Iowa is ________.

• A) a net importer of wool
• B) a net exporter of wool
• C) an exporter of wool
• D) likely has a comparative advantage in producing wool compared to Montana

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Definitions:

Residual Income

The income that remains after deducting all required costs of capital from operating income, used as a measure of profitability.

Margin

Margin refers to the difference between the selling price of a good or service and its cost of production, usually expressed as a percentage of the selling price.

Return On Investment

A gauge of an investment's profit, expressed as the return percentage in comparison to the cost of the investment.

Residual Income

Residual income is the profit remaining after deducting all required costs of capital from operating income.