David Ricardo's Theory of Comparative Advantage Attempts to Rationalize Why

question 18

Multiple Choice

David Ricardo's theory of comparative advantage attempts to rationalize why some countries export automobiles,consumer electronics,and machine tools,while other countries export chemicals,watches,and jewelry.This rationalization is best explained in terms of:

• A)absolute advantage with reference to natural resources.
• B)international differences in labor productivity.
• C)the proportions in which the factors of production are available.
• D)the cultural histories of the exporting nations.

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Definitions:

Direct Labor

The wages and other costs for labor directly involved in the production of goods or services.

Annual Overhead

The total recurring business expenses not directly tied to the production of goods or services, calculated on a yearly basis.

Manufacturing Overhead-Applied

The allocation of estimated manufacturing overhead costs to individual products or job orders based on a predetermined rate.