Fab Tools Inc can produce 150 widgets and 100 axes in a month. Another company AllMyTools Inc can produce 180 widgets and 50 axes per month. Which of the following statements is true?
a. Fab Tools has a comparative advantage in the production of widgets.
b. Fab Tools has an absolute advantage in the production of both goods.
c. AllMyTools has a comparative advantage in the production of widgets.
d. AllMyTools has an absolute advantage in the production of both goods.
C
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What is meant by fixed cost? What kinds of things might be included in fixed cost?
What will be an ideal response?
Use the above figure. Suppose that a regulatory agency requires this natural monopolist to engage in marginal cost pricing. This would lead to
A) losses, which would drive the monopolist out of business in the long run. B) profits, which would encourage new producers to enter the industry in the long run. C) profits, but new firms cannot enter the industry in the long run due to high barriers to entry. D) losses, which would encourage the monopolist to lower costs in the long run.