Table 3-26 Assume That Japan and Korea Can Switch Between Producing Cars

question 258

Multiple Choice

Table 3-26
Assume that Japan and Korea can switch between producing cars and producing airplanes at a constant rate.
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-Refer to Table 3-26. Korea has an absolute advantage in the production of

• A)cars and a comparative advantage in the production of cars.
• B)cars and a comparative advantage in the production of airplanes.
• C)neither good and a comparative advantage in the production of cars.
• D)neither good and a comparative advantage in the production of airplanes.

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Definitions:

Variable Costs

Expenses that change in proportion to the level of production or sales activity.

Contribution Margin

The difference between the sales revenue of a product and the variable costs associated with its production and sales.

Unit Contribution Margin

The amount that the sale of one unit contributes towards covering fixed costs, calculated as the sales price per unit minus variable costs per unit.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue.