If Two Companies Produce the Same Product and Have the Same

question 17

True/False

If two companies produce the same product and have the same total sales and same total expenses,operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure.

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Definitions:

Comparative Advantage

Comparative advantage is the ability of an individual or country to produce a particular good or service at a lower opportunity cost than others, forming the basis for specialization and trade.

Absolute Labor Productivity

The total output produced by a worker or workforce in a given time period, not adjusted for factors like hours worked.

Relative Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen, expressed in terms of the ratio between the cost of the chosen alternative and the cost of the next best alternative.

Opportunity Cost

The cost of forfeiting the next best alternative when one option is chosen over another.