Figure 3-1 -Refer to Figure 3-1. Which of the Following Is True

question 198

Multiple Choice

Figure 3-1
-Refer to Figure 3-1. Which of the following is true for Cliff and Paul?

• A)Paul has a comparative advantage in both wheat and corn.
• B)Paul has a comparative advantage in wheat and Cliff has a comparative advantage in corn.
• C)Cliff has a comparative advantage in wheat and Paul has a comparative advantage in corn.
• D)Cliff has a comparative advantage in both wheat and corn.

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Definitions:

Diminishing Marginal Returns

A principle stating that as more of a variable input is added to a fixed input, the additional output from each new unit of input will eventually decrease.

Profit-Maximizing Output

The level of production at which a firm achieves the highest possible profit, where marginal cost equals marginal revenue.

Sergei's Profit

A hypothetical measure of earnings named for an individual, illustrating the net gain after subtracting expenses from revenue.

Market Price

The ongoing transaction price for purchasing or offloading an asset or service.