Table 2-17 Table 2-17 Shows the Output Per Week of Week

question 32

Multiple Choice

Table 2-17
Table 2-17 shows the output per week of two people, James and Lucy. They can either devote their time to making wagons or making tricycles.
-Refer to Table 2-17. Which of the following statements is true?

• A) Lucy has a comparative advantage in making both products.
• B) James has a comparative advantage in making both products.
• C) Lucy has a comparative advantage in making wagons and James in making tricycles.
• D) Lucy has a comparative advantage in making tricycles and James in making wagons.

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Definitions:

Absorption Costing

A costing approach that consolidates every expense related to manufacturing - direct materials, direct labor, and both variable and fixed overheads - into the product’s price.

Variable Production Costs

Costs that change in proportion to the level of production activity, such as materials and labor directly involved in manufacturing.

Fixed Production Costs

Costs that do not change with the level of production or output and must be paid regardless of the volume produced.

Net Income

The total earnings of a company after subtracting all expenses and taxes from its total revenues.