Which of These Cases Is an Example of Worsening Terms

question 6

Multiple Choice

Which of these cases is an example of worsening terms of trade for a less developed country?

• A)El Salvador signs a free-trade agreement with the United States that allows the United States to keep some tariffs on Salvadoran goods.
• B)The International Monetary Fund (IMF)forces Indonesia to reduce its tariffs.
• C)A group of foreign investors removes its money from Kenya,because the government does not grant the group special concessions.
• D)The price of Chilean copper decreases while the price of Japanese cars increases.
• E)The amount of oil Nigeria can export decreases while the number of imported cars increases.

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Definitions:

Contribution Margin

The amount by which sales revenue exceeds variable costs, used to cover fixed costs and generate profit.

Break-Even Point

The point at which total costs equal total revenue, meaning the business does not make a profit or loss.

Degree of Operating Leverage

A financial metric that measures the sensitivity of a company's operating income to its sales, indicating the proportion of fixed to variable costs.

Variable Expenses

Expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor.