An Automobile Company Has Two Factories, One in Vietnam and One

question 42

Multiple Choice

An automobile company has two factories, one in Vietnam and one in Australia each with the same number of workers. The Vietnamese factory can produce either 150 engines or 100 transmissions per day. The Australian factory can produce either 100 engines or 75 transmissions per day.

• A)The Vietnamese factory has an comparative advantage producing both engines and transmissions.
• B)The Australian factory has an absolute advantage in the production of transmissions.
• C)The Vietnamese factory has a comparative advantage in the production of transmissions.
• D)The Australian factory has a comparative advantage in the production of transmissions.

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Definitions:

Trade Tariffs

Taxes imposed by a government on imported goods to protect domestic industries and generate revenue.

Wage Rates

The standardized amount of compensation received by a worker per unit of time or per task performed.

High Wages

A level of income that is significantly above the average or minimum wage.

Protectionism

Economic policy of restricting imports from other countries through methods such as tariffs and quotas, intended to protect domestic industries from foreign competition.