According to the Principle of Comparative Advantage, Specialization and Trade

question 82

Multiple Choice

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

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

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, depreciation on equipment, and factory rent.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate manufacturing overhead costs to products based on a selected activity base such as machine hours or labor hours.

Direct Labor-Hours

The full extent of hours dedicated by employees who are directly integrated into the production process.

Manufacturing Overhead

All indirect factory-related costs incurred during the production process, excluding direct materials and direct labor costs.