If the Price of the Capital Intensive Product Rises More

question 6

Multiple Choice

If the price of the capital intensive product rises more than does the price of the land intensive product,then

• A) the relative price of the capital intensive product will fall to some point between the pretrade relative prices.
• B) demand will shift away from the capital-intensive product, and its production will decrease.
• C) demand will shift away from the capital-intensive product, and its production will decrease relative to that of the land intensive product.
• D) the production of the capital-intensive product will decrease, but by less than production of the land-intensive product.
• E) the country that exports the capital-intensive good will lose its comparative advantage.

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Definitions:

Liability Account

A type of financial account which represents a company's legal debts or obligations that arise during the course of business operations.

Expense Account

An account used in accounting to track expenditures related to the operation of a business, including costs for goods, services, and operational activities.

Adjusting Journal Entries

Entries in accounting made during the close of a financial period, aiming to accurately allocate profits and expenditures to their respective periods of occurrence.

Net Income

A company's overall earnings following the deduction of all expenses and taxes from its total revenue.