Although It Lacks Sources of Timber and Oil, Chablis Has

question 31

Multiple Choice

Although it lacks sources of timber and oil, Chablis has a plentiful supply of grapes for its many wineries. Which statement about Chablis is true?

• A) It has a comparative advantage in wine production.
• B) It has a comparative advantage in timber and oil production.
• C) It has an absolute advantage in the production of wine.
• D) It has an absolute advantage in timber and oil production.
• E) It has no comparative or absolute advantages.

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Definitions:

Long Run

A period during which all factors of production and costs are variable, allowing full adjustment to any change.

Fixed Cost

Describes expenses that do not change with the level of production or business activity, such as rent, salaries, and insurance premiums.

Variable Cost

Costs that change in proportion to the good or service that a business produces.

Total Cost

The complete cost of production, including both fixed and variable costs.