Use the Following Scenario to Answer the Following Questions

question 32

Multiple Choice

Use the following scenario to answer the following questions:
Karl and Jager produce cars and trucks.Karl can produce 10 cars per hour or 5 trucks per hour.Jager can produce 12 cars per hour or 4 trucks per hour.
-Based on the scenario,which of the following is true?

• A) Karl has both an absolute and a comparative advantage in car production.
• B) Karl has both an absolute and a comparative advantage in truck production.
• C) Karl has neither an absolute nor a comparative advantage in car production.
• D) Karl has neither an absolute nor a comparative advantage in truck production.
• E) Jager has both an absolute and a comparative advantage in truck production.

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Definitions:

Break-even

The point at which total cost and total revenue are equal, resulting in no net loss or gain.

Variable Costs

Expenses that change in proportion to the level of production or business activity.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activities, such as rent, salaries, and insurance.

Contribution Margin

The sales price minus the variable costs of a product, indicating how much selling one more unit adds to profit.