Practice Questions
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Which of the following scenarios best illustrates the principle of comparative advantage in resource allocation?
When Country A makes computers and Country B makes cars, they both do what they are best at. Other options are incorrect because This option suggests ...
Which of the following statements best illustrates the difference between absolute advantage and comparative advantage in the production of goods?
Country A has a lower opportunity cost in making one good. Other options are incorrect because This option confuses absolute advantage with comparativ...
In a market characterized by comparative advantage, how do factor endowments influence market equilibrium?
Factor endowments, like natural resources or skilled workers, shape how much of a good can be made. Other options are incorrect because Some might thi...
Which of the following statements best reflects the concept of comparative advantage in trade, considering absolute advantage and factor endowments?
Comparative advantage means a country can make something at a lower cost than another country. Other options are incorrect because This idea suggests ...
How does the concept of specialization relate to the theory of comparative advantage in economic policy implications, particularly when comparing a nation with an absolute advantage in multiple goods versus another nation?
Specialization helps countries focus on what they do best. Other options are incorrect because This answer suggests that if a country is really good a...
If Country A can produce 10 units of wine or 5 units of cheese with the same resources, and Country B can produce 6 units of wine or 2 units of cheese, which country has a comparative advantage in producing cheese?
Country B has a lower opportunity cost for cheese. Other options are incorrect because Some might think Country A is better at making cheese; This cho...
In the context of comparative advantage, what is the primary reason a country should specialize in the production of a particular good?
When a country focuses on making one good, it can do it better and faster. Other options are incorrect because Some might think a country should make ...
Which of the following statements best describes the concept of comparative advantage in international trade?
This statement is true because countries should focus on making things they can produce better than others. Other options are incorrect because This i...
Which of the following statements accurately reflect the concept of comparative advantage? Select all that apply.
Comparative advantage means focusing on what you do best compared to others, not just being better at everything. Other options are incorrect because ...
In a scenario where Country A can produce 10 units of cloth or 5 units of wine, and Country B can produce 6 units of cloth or 6 units of wine, which country has a comparative advantage in wine production?
Country B has a lower opportunity cost for making wine. Other options are incorrect because Some might think Country A is better because it makes more...
In the context of international trade, a country has a __________ in producing a good if it can produce that good at a lower opportunity cost than another country.
A country has a comparative advantage when it gives up less to make something. Other options are incorrect because Some might think absolute advantage...
If a country specializes in producing goods where it has a comparative advantage, what is the most likely outcome for its trade relationships?
When a country focuses on what it does best, it can produce more efficiently. Other options are incorrect because Some might think that specializing m...
How can a country benefit from specializing in goods where it has a comparative advantage?
When a country focuses on making goods it can produce best, it can trade these for other goods. Other options are incorrect because Some might think t...
A country, A, can produce 10 units of wine or 5 units of cheese with the same resources, while country B can produce 6 units of wine or 2 units of cheese. Based on the concept of comparative advantage, which category should each country fall into regarding production specialization?
Country A can make more wine with its resources than cheese. Other options are incorrect because This idea suggests both countries can make wine equal...
Country A can produce either 10 units of wine or 5 units of cheese with its available resources, while Country B can produce either 6 units of wine or 4 units of cheese. If both countries decide to specialize in the product for which they have a comparative advantage, which of the following outcomes is likely to occur?
Country A can make more wine than cheese, while Country B is better at making cheese. Other options are incorrect because Some might think both countr...
If Country A specializes in producing textiles at a lower opportunity cost than Country B, then Country B would be better off specializing in which of the following goods if it has a comparative advantage in that production? A:B :: C:?
Country B should focus on making agricultural products. Other options are incorrect because Some might think electronics are a good choice; Choosing t...
Arrange the following steps in the process of utilizing comparative advantage in international trade: A) Specialization in goods with lower opportunity costs, B) Trade between countries based on these specializations, C) Assessment of opportunity costs for different goods, D) Increased overall efficiency and welfare among trading nations.
First, countries look at what they give up to make goods, called opportunity costs. Other options are incorrect because This suggests countries specia...
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