Both Claudia and Javier Are Certified Educators

question 188

Multiple Choice

Both Claudia and Javier are certified educators. Claudia makes $55,000 a year working as a teacher in a public high school in Chicago. Javier makes $40,000 working as a grade school teacher in a private school in Chicago. Which of the following is true?

• A) Javier is clearly worse off than Claudia, because he earns $15,000 a year less.
• B) Javier must be better off than Claudia if he is willing to take a job at $15,000 a year less than Claudia.
• C) From this information it cannot be determined who is better off because income is an imperfect measure of well-being.
• D) Even though income is an imperfect measure of well-being, Claudia and Javier must be equally well off because either is free to switch jobs.

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Definitions:

Step-fixed Costs

Costs that remain constant for a certain level of production or activity, but can change to a different fixed amount when a certain threshold is crossed.

Variable Costs

Costs that vary directly with the level of production or output.

Absorption Costing

An accounting method that includes all manufacturing costs—direct materials, labor, and both variable and fixed overhead—as part of the cost of a finished product.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overheads - in the cost of a product.