Which of the Following Describes Comparative Advantage

question 346

Multiple Choice

Which of the following describes comparative advantage?

• A) Company A can produce 4 boxes of cereal in a day whereas Company B can produce 5 boxes of cereal in a day.
• B) Firm A can produce a good at a cost of $3 and Firm B can produce the good at a cost of $4.
• C) Jane can type 50 words per minute and Joe can type 60 words per minute.
• D) To produce a bushel of wheat Farmer John must give up 2 bushels of corn whereas Farmer Ben must give up 3 bushels of corn.

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Definitions:

Variable Costs

Expenses that fluctuate in direct proportion to the amount of production or sales, including items like labor and materials.

Fixed Costs

Expenses that don't change in total over a period, regardless of the level of output or sales.

Operating Income

The income generated from the core operations of a business, excluding costs and expenses like taxes and interest payments.

Direct Materials Price Variance

Direct materials price variance refers to the difference between the actual cost of materials used in production and the standard cost expected for those materials.