Use the Following Scenario to Answer the Following Questions

question 17

Multiple Choice

Use the following scenario to answer the following questions:
Suppose that Canada,an industrialized nation,and Mexico,a developing nation,both produce clothes and cars.The real wage in Mexico is lower than in Canada.The countries have a free trade agreement.Each nation will find a comparative advantage.
-Which country benefits from this free trade agreement?

• A) Canada
• B) Mexico
• C) neither of them
• D) both of them
• E) not enough information to determine

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Definitions:

Industrial Photo-finishing

Refers to the commercial process of developing and printing photographic images on a large scale, typically for businesses.

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs are subtracted, indicating how much contributes towards fixed costs and profit.

Break-Even Point

The level of sales or production at which a business's revenues exactly cover its expenses, leading to neither profit nor loss.

Variable Expenses

Costs that fluctuate in direct proportion to changes in activity level or volume, such as raw materials and direct labor costs.