If Canada Has a Comparative Advantage Relative to Mexico in the Production

question 14

Multiple Choice

If Canada has a comparative advantage relative to Mexico in the production of timber, then

• A) the explicit cost of production for timber is lower in Canada than in Mexico.
• B) the opportunity cost of production for timber is lower in Canada than in Mexico.
• C) the implicit costs of production for timber are lower in Canada than in Mexico.
• D) the average cost of production for timber is lower in Canada than in Mexico.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, including utilities, maintenance, and salaries of non-direct labor.

Predetermined Overhead Rate

A rate used to allocate indirect costs to products or services, calculated before the accounting period begins based on estimated costs and activity levels.

Direct Labor-hour

A metric that calculates the total number of hours worked by employees directly involved in manufacturing a product or providing a service.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead to individual units of production, based on a related activity base.