Suppose It Takes Dan 5 Minutes to Make a Sandwich

question 93

Multiple Choice

Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?

• A)Dan has the comparative advantage in smoothies, but Tracy has the absolute advantage in smoothies.
• B)Dan has the comparative and absolute advantage in sandwiches.
• C)Dan has the comparative and absolute advantage in smoothies.
• D)Dan has the comparative advantage in sandwiches, but Tracy has the absolute advantage in sandwiches.

Acknowledge how financial leverage affects a firm's ROA and cost structure.

Understand the role of EBIT-EPS analysis in evaluating leverage decisions.

Learn about operating leverage and its consequences on a firm's risk profile.

Understand the implications of breakeven analysis in the context of financial leverage and operating risk.

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Definitions:

Recessions

Periods of economic decline when GDP falls for two consecutive quarters, leading to a decrease in consumer spending and investment.

Government Surplus

A situation where the government's income, mainly from taxes, exceeds its expenditures within a specific timeframe, indicating fiscal health.

Monetary Growth

This refers to the increase in the amount of money in an economy over time, which can influence inflation and economic activity.

Q

Output, or number of goods and services produced during the current year.