If France Is Capable of Producing Either Cheese or Wine

question 39

Multiple Choice

If France is capable of producing either cheese or wine or some combination of those two products,then:

• A)France should produce the one it is more efficient at producing.
• B)France should produce the one for which it has a lower opportunity cost.
• C)France should produce the one for which is has a higher opportunity cost.
• D)France should remain self-sufficient if it has the absolute advantage in the production of both.

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Definitions:

Product Cost

The total expense incurred to produce and make ready for sale a product, including direct materials, labor, and overhead costs.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision.

Total Expected Cost

A projection of the total costs associated with a project or business activity, including both fixed and variable costs.

Variable Costs

Costs that vary depending on the amount of production or business operations.