Table 3.3 -Jimbo Has a Comparative Advantage Over Ned in Producing a Ned

question 14

Multiple Choice

Table 3.3

-Jimbo has a comparative advantage over Ned in producing a good if

• A) Jimbo can produce more of the good than Ned can in a given time period.
• B) Jimbo has a lower opportunity cost of producing the good than does Ned.
• C) Jimbo has to trade off more than Ned does to produce the good.
• D) Jimbo has a higher opportunity cost of producing the good than does Ned.

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Definitions:

Fixed Costs

Expenses that do not change in total regardless of changes in the volume of goods or services produced or sold.

Variable Costs

Costs that change in proportion to the level of production or business activity, such as raw materials and direct labor costs.

Variable Cost

Spending that rises and falls according to how much is produced or sold, including costs for labor and materials.

Fixed Costs

Expenses that do not vary with the volume of production or sales, such as rent, salaries, and insurance.