A New Country Is Formed in Central Africa

question 115

Multiple Choice

A new country is formed in central Africa.It has no absolute advantage in crude oil,diamonds,or wool.However,it does manufacture high-quality bows and arrows for specialized safari adventures.Which of the following statements is true?

• A) The new country should try to produce its own crude oil,diamonds,and wool.
• B) The new country has a comparative advantage in the production of bows and arrows.
• C) The new country has an unqualified advantage in the production of bows and arrows.
• D) The new country has a determined advantage in the production of arrows.
• E) The new country is engaged in dumping bows and arrows.

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Definitions:

Variable Costs

Expenses that change in proportion to the level of production or sales activity.

Contribution Margin

The difference between the sales revenue of a product and the variable costs associated with its production and sales.

Unit Contribution Margin

The amount that the sale of one unit contributes towards covering fixed costs, calculated as the sales price per unit minus variable costs per unit.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.