Table 7-6 Production and

question 15

Multiple Choice

Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 sword in Morocco?

• A)1/2 of a belt
• B)4/5 of a belt
• C)1.25 belts
• D)2 belts

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Definitions:

Accrual Accounting

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when cash is exchanged.

Cash-Basis Accounting

An accounting method where revenues and expenses are recorded when cash is received or paid, rather than when they are earned or incurred.

Matching Principle

An accounting principle that dictates expenses should be matched with the revenues they help to generate within the same period.

Generating Revenue

The process by which a company earns income through its business activities, such as selling goods or services.