Which of the Following Best Describes the Comparative Advantage of the Two

question 105

Multiple Choice

Which of the following best describes the comparative advantage of the two countries illustrated in Figure 35.1?

• A) Japan has a comparative advantage in both goods.
• B) Japan has a comparative advantage in DVD players, the United States in motorcycles.
• C) Japan has a comparative advantage in motorcycles, the United States in DVD players.
• D) The United States has a comparative advantage in both goods.

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Definitions:

Absorption Costing

The reporting of the costs of manufactured products, normally direct materials, direct labor, and factory overhead, as product costs.

Factory Superintendent's Salary

An operational cost, this is the compensation paid to the individual responsible for overseeing the production in a manufacturing plant.

Property Taxes

Levies imposed by a government on real estate or other property, based on the property's value.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.