225 in a World with Two Products, Wheat (W) and Coffee

question 234

Multiple Choice

225. In a world with two products, wheat (W) and coffee (C) , nation Alpha produces wheat and nation Beta produces coffee. Nation Alpha prefers an exchange rate of 1W = 2C, and nation Beta prefers an exchange rate of 1W = 1C. The exchange rate preferred by nation

• A) Alpha will prevail if world demand for coffee is great relative to its supply.
• B) Alpha will prevail if world demand for wheat is weak relative to its supply.
• C) Beta will prevail if world demand for coffee is great relative to its supply.
• D) Beta will prevail if world demand for wheat is great relative to its supply.

---

Definitions:

Space Occupied

The amount of physical area taken up by an object, person, or activity, typically measured in square feet or meters.

Step-down Method

The step-down method is an accounting practice used to allocate costs among departments, beginning with the highest cost pool.

Allocation Base A

An allocation base is a measure or quantity, such as machine hours or labor costs, used to assign indirect costs to different products or services.

Allocation Base B

A criterion or standard used to distribute overhead costs among various cost objects.