If Shawn Can Produce Donuts at a Lower Opportunity Cost

question 136

Multiple Choice

If Shawn can produce donuts at a lower opportunity cost than Sue, then

• A) Shawn has a comparative advantage in the production of donuts.
• B) Sue has a comparative advantage in the production of donuts.
• C) Shawn should not produce donuts.
• D) Shawn is capable of producing more donuts than Sue in a given amount of time.

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Definitions:

Net Operating Income

The total revenue from operations minus the operating expenses, exclusive of taxes and interest, in a different phrasing.

Variable Manufacturing Overhead

Costs of manufacturing that vary directly with the level of production, such as utilities for the manufacturing plant.

Break-even Sales

The amount of revenue needed to cover all fixed and variable costs, resulting in neither profit nor loss.

Southern Division

A geographical or organizational subsection of a company that operates in the southern region.