Suppose That the U

question 80

Multiple Choice

Suppose that the U.S. price index for its imports rose from 100 to 120 from 2010 to 2011 and the price index for its exports remained unchanged. Which of the following statements is correct?

• A) The U.S. terms of trade worsened between 2010 and 2011.
• B) The U.S. terms of trade improved between 2010 and 2011.
• C) The U.S. terms of trade improved in 2010 and worsened in 2011.
• D) There was no change in the U.S. terms of trade between 2010 and 2011.

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Definitions:

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services and are an integral part of the finished product.

Variable Factory Overhead

Variable factory overhead consists of production costs that vary with the level of output, such as utilities and indirect materials.

Fixed Costs

Costs that tend to remain the same in amount, regardless of variations in the level of activity.

Differential Revenue

The additional revenue generated from choosing one alternative over another in decision-making processes.