Scenario 20.1 Suppose Labor Productivity Differences Are the Only Determinants of Comparative

question 101

Multiple Choice

Scenario 20.1
Suppose labor productivity differences are the only determinants of comparative advantage, and Brazil and Chile both produce only coffee and sugar. In Chile, either 5 units of coffee or 2 units of sugar can be produced in one day. In Brazil, a day of labor produces either 2 units of coffee or 1 unit of sugar.
-Refer to Scenario 20.1. Calculate the opportunity cost of producing sugar in Brazil.

• A)Half a pound of coffee
• B)4 pounds of coffee
• C)1 pound of coffee
• D)2 pounds of coffee
• E)One and a half pounds of coffee

---

Definitions:

Variable Costing

An accounting method that only includes variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Product Costs

The costs directly associated with the creation of a product, encompassing direct materials, direct labor, and manufacturing overhead.

Variable Manufacturing Costs

Costs that vary directly with the volume of production, such as raw materials and direct labor.

Manufacturing Overhead

The collective costs associated with the production process that cannot be directly traced to specific units produced, including indirect materials, labor, and other overhead expenses.