APM_U1.P2 - 1.3 Comparative Adv. & 1.4 Demand

Front

What is the main principle behind the concept of comparative advantage?

Back

Specializing in the production of goods with the lowest opportunity cost

Front

How is comparative advantage different from absolute advantage?

Back

Comparative advantage focuses on opportunity cost, while absolute advantage focuses on resource efficiency.

Front

What formula do economists use to identify comparative advantage?

Back

Give up / Gain

Front

What happens when the terms of trade fall between the opportunity costs of two trading partners?

Back

Both partners benefit from the trade

Front

What is the opportunity cost for Canada to produce steel?

Back

1/2 a unit of coal

Front

What does comparative advantage refer to?

Back

Producing goods with the lowest opportunity cost.

Answer explanation

Rationale: Comparative advantage focuses on producing goods with the lowest opportunity cost, which determines trade benefits.

Front

Which of the following best describes terms of trade?

• The cost of importing goods into a country

,

• The exchange rate between two currencies

,

• The rate at which goods are exchanged between nations

,

• The value of total exports in a country

Back

The rate at which goods are exchanged between nations

Answer explanation

Rationale: Terms of trade refer to the exchange rate for goods between trading partners, ensuring mutual benefit.

Front

If Country A can produce 10 cars or 5 planes, and Country B can produce 8 cars or 4 planes, what is the opportunity cost for Country A to produce one plane?

Back

2 cars

Answer explanation

Rationale: Country A sacrifices 2 cars (10/5) to produce 1 plane, illustrating the opportunity cost.

Front

What does the law of demand state about the relationship between price and quantity demanded?

Back

As price increases, quantity demanded decreases.

Front

Which of the following is NOT a determinant of demand according to the INSECT acronym? Income, Number of buyers, Tastes and preferences

Back

Technology