Based on the Comparative Cost Ratios Implied in Figure 35

question 101

Multiple Choice

Based on the comparative cost ratios implied in Figure 35.2, it is clear that

• A) The United States has a comparative advantage in baseballs and Mexico has a comparative advantage in golf shoes.
• B) Mexico should import all of its golf shoes from the United States.
• C) The United States should import all of its baseballs from Mexico.
• D) The United States should specialize in producing golf shoes, and Mexico should specialize in producing baseballs.

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Definitions:

Fixed Expense

Overheads that stay the same, no matter how much is produced or sold, encompassing charges such as property rent, staff paychecks, and insurance coverage costs.

Break-Even

Break-even refers to the point at which total costs and total revenues are exactly equal, resulting in neither profit nor loss.

Variable Expense

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

Break-Even

The moment when total income matches total expenses, creating a situation with neither profit nor loss.