In One Hour John Can Produce 20 Loaves of Bread

question 259

Multiple Choice

In one hour John can produce 20 loaves of bread or 16 cakes.In one hour Phyllis can produce 30 loaves of bread or 15 cakes.Which of the following statements is true?

• A) Phyllis has a comparative advantage in producing bread.
• B) John has a comparative advantage in producing cakes.
• C) Phyllis has an absolute advantage in both goods.
• D) John has an absolute advantage in both goods.
• E) Phyllis has a comparative advantage in producing both cakes and bread.

---

Definitions:

Abnormal Earnings

Profits that exceed or fall below what is typically expected, often due to unusual events or one-time gains and losses.

Actual Earnings

The real income a company generates from its business activities, distinct from its reported or projected earnings.

Earnings Capitalization

A method for valuing a company by dividing its annual earnings by a certain capitalization rate, reflecting the investment's expected rate of return.

Value-Irrelevant

pertains to information or aspects that do not affect an entity's market value or decision-making process.