John and Mary Work Eight Hours at a Bakery

question 279

Multiple Choice

John and Mary work eight hours at a bakery. John can decorate either 10 ice-cream cakes or 4 wedding cakes; Mary can decorate either 8 ice-cream cakes or 2 wedding cakes. According to this scenario

• A)Mary has the absolute advantage in decorating wedding cakes.
• B)John has the absolute advantage in decorating wedding cakes.
• C)Mary has the comparative advantage in decorating wedding cakes.
• D)John has the comparative advantage in decorating ice-cream cakes.

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Definitions:

Present Value

The value today of a sum of money or future cash flows, taking into account a specific rate of return.

Future Cash Flow

The projected movement of money into and out of a business or investment over future periods.

Avoidable Costs

Expenses that can be eliminated if a particular decision is made or if a business operation is discontinued.

Future Costs

Costs that have not yet been incurred but are expected to be spent in the future for operational or investment purposes.