If a Country Can, with a Single Unit of Labor

question 28

Multiple Choice

If a country can, with a single unit of labor, produce more of both clothing and computers than another country, then the first country has

• A)a comparative advantage in both goods.
• B)an absolute advantage in both goods.
• C)both a comparative and absolute advantage in both goods.
• D)an absolute advantage in one good and a comparative advantage in the other.

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Definitions:

Economic Profit

The difference between total revenue and total costs, where costs include both explicit and implicit costs.

Competitive Firm

A company that operates in a market where it must take the prevailing market price as given because the firm's individual sales do not significantly affect the market price.

Total Revenue

The total income generated by a firm from selling its goods or services, calculated as the price per unit times the number of units sold.

Output Units

Refers to the quantity of goods or services produced within a given time frame.