The Tables Give Production Possibilities Data for Two Countries, Alpha $\quad$

question 90

Multiple Choice

The tables give production possibilities data for two countries, Alpha and Beta, which have populations of equal size. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Alpha's production possibilities }$
$\begin{array}{|c|c|c|c|c|c|}\hline & \text { A } & \text { B } & \text { C } & \text { D } & \text { E } \\\hline \text { Fish (Tons) } & 80 & 60 & 40 & 20 & 0 \\\hline \text { Chips (Tons) } & 0 & 5 & 10 & 15 & 20 \\\hline\end{array}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Beta's production possibilities }$
$\begin{array}{|c|c|c|c|c|c|} \hline& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \\\hline \text { Fish (Tons) } & 240 & 180 & 120 & 60 & 0 \\\hline \text { Chips (Tons) } & 0 & 10 & 20 & 30 & 40\\\hline\end{array}$ Assume the production possibilities in Beta double at alternatives A through E, while remaining as shown in the table for Alpha. As a result, Beta should

• A) continue to specialize in producing chips.
• B) continue to specialize in fishing.
• C) no longer specialize and trade.
• D) specialize both in fishing and in producing chips and sell the surplus to Alpha.

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Definitions:

Conversion Costs

The sum of labor costs and overhead expenses related to the transformation of materials into finished products.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services and are a significant component of manufacturing costs.

Equivalent Units

A concept used in cost accounting to represent the amount of work done on incomplete units, expressed as the equivalent of a number of fully completed units.

FIFO Method

First In, First Out, an inventory valuation method where goods and materials that are acquired first are sold or used first.