Mason and Chloe Each Produce Two Goods

question 135

Multiple Choice

Mason and Chloe each produce two goods. According to the principle of comparative advantage, the total output produced by these individuals will be greatest

• A) if Chloe produces both goods and Mason produces nothing.
• B) if each good is produced by the individual who has the lower opportunity cost of producing that good.
• C) if each good is produced by the individual who has the higher absolute cost of producing that good.
• D) if Mason produces both goods and Chloe produces nothing.

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Definitions:

Required Return

The minimum expected yield by investors as compensation for the level of risk associated with an investment.

Initial Investment

The amount of money used to start a project, business, or investment.

Cash Break-even Point

The point at which a business generates enough cash flow to cover its operating expenses, without generating a profit or loss.

Variable Cost

Expenditures that fluctuate according to the degree of production or the volume of goods produced.