Figure 3-2 -Refer to Figure 3-2. What Do the Two Producers Have

question 9

Multiple Choice

Figure 3-2
-Refer to Figure 3-2. What do the two producers have an absolute or comparative advantage in?

• A) Paul has a comparative advantage in both wheat and corn.
• B) Paul has an absolute advantage in wheat, and Cliff has a comparative advantage in corn.
• C) Cliff has a comparative advantage in wheat, and Paul has a comparative advantage in corn.
• D) Cliff has a comparative advantage in both wheat and corn.

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Definitions:

Fixed Manufacturing Overhead

Indirect production costs that remain constant regardless of the level of production, such as rent, property taxes, and insurance.

Variances

The differences between planned or expected financial outcomes and the actual financial outcomes.

Fixed Overhead

The portion of overhead costs that remains constant regardless of the level of production or business activity.

Direct Labor

The labor costs directly tied to the production of goods or services, such as wages paid to employees who physically produce a product.