According to the Principle of Comparative Advantage,specialization and Trade Increase

question 179

Multiple Choice

According to the principle of comparative advantage,specialization and trade increase a nation's total output since:

• A) Resources are directed to their highest productivity
• B) The output of the nation's trading partner declines
• C) The nation can produce outside of its production possibilities curve
• D) The problem of unemployment is eliminated

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Definitions:

Absorption Costing

An approach to accounting that incorporates all costs associated with manufacturing, including direct materials, direct labor, and all overhead costs, both variable and fixed, into the price of a product.

Normal Operating Capacity

The level of production that a company can sustain under normal circumstances without overstretching its resources or machinery.

Inventory Costs

All costs associated with ordering, holding, and managing inventory, not limited to purchase costs, storage, and carrying costs.

Direct Method

A cost allocation method that assigns service departments’ costs directly to producing departments without any intermediate steps.