Table 3-3 -Refer to Table 3-3.What Does Each of the Two Producers

question 61

Multiple Choice

Table 3-3

-Refer to Table 3-3.What does each of the two producers have a comparative or absolute advantage in

• A)Kevin has a comparative advantage in sweaters, and Amy has an absolute advantage in neither good.
• B)Kevin has a comparative advantage in blankets, and Amy has an absolute advantage in sweaters.
• C)Kevin has a comparative advantage in sweaters, and Amy has an absolute advantage in blankets.
• D)Kevin has a comparative advantage in blankets, and Amy has an absolute advantage in both goods.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or service delivery.

Fixed Manufacturing Cost

A rephrased definition for Fixed Manufacturing Overhead; these are costs that do not change with the level of manufacturing activity, such as property taxes on a factory.

Manufacturing Overhead

All indirect costs associated with the manufacturing process, including utilities, depreciation, and salaries for management.

Fixed Manufacturing Cost

Costs that remain constant regardless of the level of production, such as salaries of permanent employees and depreciation of factory equipment.