Suppose an American Worker Can Make 50 Pairs of Gloves

question 81

Multiple Choice

Suppose an American worker can make 50 pairs of gloves or grow 300 radishes per day.A Bangladeshi worker,on the other hand,can produce 100 pairs of gloves or grow 200 radishes per day.Which of the following statements is true?

• A)Bangladesh should specialize in glove production since it possesses the comparative advantage in glove production.
• B)Bangladesh should specialize in radish production since it possesses the comparative advantage in radish production.
• C)Bangladesh should only produce gloves since it has the absolute advantage in glove production.
• D)Bangladesh should only produce radishes since it has the absolute advantage in radish production.

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Definitions:

Variable Costing

A costing method in which fixed manufacturing overhead is not assigned to the product, but rather treated as an expense of the period.

Absorption Costing

is an accounting method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in the cost of a product.

Unit Product Cost

The total cost incurred to produce, manufacture, or acquire a product, divided by the total number of units produced.

Absorption Costing

A financial recording approach that encompasses all production expenses, such as direct materials, direct labor, and overhead costs, within the price of a product.