Use the Following to Answer Question(s): Production Possibilities Schedule for Two

question 131

Multiple Choice

Use the following to answer question(s) : Production Possibilities Schedule for Two Commodities

-(Exhibit: Production Possibilities Schedule for Two Commodities) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of units of commodity X each country would have to forgo to produce the additional units of commodity Y indicated.Further assume that the only input is labor and that it remains fully employed.We see from the table that Canada:

• A) has an absolute advantage in the production of both goods and a comparative advantage in the production of commodity X.
• B) has an absolute advantage in the production of both goods and a comparative advantage in the production of commodity Y.
• C) does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of commodity X.
• D) does not have an absolute advantage in the production of either good, but it has a comparative advantage in the production of commodity Y.

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Definitions:

Marginal Cost

The boost in complete costs associated with creating one more unit of a product or service.

Private Good

A product that is excludable and rival in consumption, meaning its use is limited to the purchaser and it cannot be shared without diminishing availability to others.

Rivalry

Competition or contention between two or more parties for a goal that only one can attain.

Excludability

A characteristic of a good according to which it is possible to prevent people who have not paid for the good from consuming it.