John Can Make Pizza at a Lower Opportunity Cost Than

question 23

Multiple Choice

John can make pizza at a lower opportunity cost than Allen,but Allen can make more pizzas per day than John.Therefore,

• A) John cannot benefit from trade with Allen.
• B) Allen cannot benefit from trade with John.
• C) John has a comparative advantage in pizza.
• D) John has an absolute advantage in pizza.
• E) Allen has a comparative advantage in pizza.

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Definitions:

Estimated Activity

An approximation of the level of operational or production activity expected in a certain period, typically used for budgeting and costing.

Unused Capacity

The portion of a company's production or operational potential that is not currently being utilized.

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead costs to products based on a particular activity base, such as machine-hours or labor-hours.

Automated Lathe

A CNC (Computer Numerical Control) machine tool used to shape metal, wood, or other materials by rotating it rapidly along its axis while pressing a fixed cutting or abrading tool against it.