A Nation Has a Comparative Advantage in the Production of Cars

question 24

Multiple Choice

A nation has a comparative advantage in the production of cars over another nation if:

• A)​it can produce cars with fewer resources than the other country.
• B)​it can produce cars at a lower opportunity cost than the other country.
• C)​it can produce cars at a higher opportunity cost than the other country.
• D)​it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country.

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Definitions:

Selling Expenses

Costs incurred directly from the sale of a product or service, not including the cost of goods sold but may include advertising, sales commissions, and store supplies.

Absorption Costing

A pricing approach that encompasses all production expenses, such as direct materials, direct labor, along with both variable and fixed overhead, in a product's cost.

Variable Costing

An accounting method that only allocates variable costs to inventory, treating fixed costs as period costs that are expensed in the period they are incurred.

Operating Income

The profit realized from a business's operations after subtracting operating expenses from gross profit, indicating the efficiency of core business activities.