Assume Australia Can Use a Given Amount of Its Resources

question 18

Multiple Choice

Assume Australia can use a given amount of its resources to produce either 20 caravans or eight automobiles and Japan can employ the same amount of its resources to produce either 20 caravans or 10 automobiles. Australia should specialise in:

• A) caravans.
• B) automobiles.
• C) both goods.
• D) neither good.

---

Definitions:

Operating Capacity

The maximum output or productivity level that a company can achieve using its current resources under normal working conditions.

Fixed Overhead Costs

Expenses that do not change with the level of production, such as rent or salaries of administrative staff.

Effect On Income

The impact of specific actions, events, or decisions on a company's net income or profitability.

Book Value

Book value is the net value of a company's assets as reported on the balance sheet, calculated by subtracting liabilities from the total assets.