If Leslie Can Produce Two Pairs of Pants in an Hour

question 37

Multiple Choice

If Leslie can produce two pairs of pants in an hour while Eva can make one pair in an hour,then

• A) Leslie has a comparative advantage.
• B) Eva has an absolute advantage.
• C) Leslie has an absolute advantage.
• D) Eva has a comparative advantage.
• E) Leslie has a comparative disadvantagE.

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Definitions:

Fixed Manufacturing Overhead

Indirect manufacturing costs that remain relatively constant regardless of the level of production, such as rent, salaries, and insurance.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, indicating how much contributes to covering fixed costs and generating profit.

Net Operating Income

The income generated from normal business operations after subtracting operating expenses from gross profit.

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, ensuring stability in budget planning.