AP 1.4 Comparative Advantage

Multiple Choice

Which of the following would cause a parallel shift to the right of the production possibilities curve (PPC)?

• An increase in the productivity of labor with respect to producing good X

• An increase in the amount of labor available for production

• A reduction in the unemployment of labor

• An increase in the demand for good X and good Y

Open Ended

How does Trump’s tariff concession show that trade can be mutually beneficial?

Multiple Choice

Which of the following is NOT a fundamental economic question?

• What will be produced?

• How will the goods/services be produced?

• Who will get the goods and services?

• How much profit will be made?

Multiple Select

Which of the following are studied in macroeconomics?

• Inflation

• Household decision-making

• Unemployment

• Economic growth

Open Ended

What factors should the baker consider when deciding whether to work at the bakery or tutor their child?

Multiple Choice

Who has the lower opportunity cost for teaching math, you or the baker?

• You

• The Baker

• Both have the same opportunity cost

• Cannot be determined

Multiple Choice

What is the opportunity cost of tutoring for the baker and for you?

• Baker: 10 loaves, You: 2 loaves

• Baker: 2 loaves, You: 10 loaves

• Baker: 5 loaves, You: 5 loaves

• Baker: 0 loaves, You: 12 loaves

Open Ended

Explain why it is beneficial for you to tutor math and for the baker to bake bread, based on opportunity cost.

Multiple Choice

Based on the data, who has the absolute advantage in producing cars and textiles?

• U.S. has absolute advantage in both cars and textiles

• China has absolute advantage in both cars and textiles

• U.S. has absolute advantage in cars, China in textiles

• U.S. has absolute advantage in cars, U.S. in textiles

Open Ended

Describe how two countries can benefit from trade according to the principle of comparative advantage.

Multiple Choice

Which of the following statements about comparative advantage is correct?

• It means producing more of a good than another country.

• It means producing a good at a lower opportunity cost than another producer.

• It means having more resources than another country.

• It means trading only with countries that have absolute advantage.

Multiple Choice

Based on the opportunity costs shown, which country has the comparative advantage in kites and which in computers?

• Canada has comparative advantage in kites, Panama in computers

• Panama has comparative advantage in kites, Canada in computers

• Both have comparative advantage in kites

• Both have comparative advantage in computers

Multiple Choice

Which of the following statements about gains from trade is correct?

• Gains from trade arise only when countries have equal opportunity costs.

• Gains from trade arise from comparative advantage, which is based on differences in opportunity costs.

• Gains from trade arise when countries produce all goods themselves.

• Gains from trade arise only when countries have absolute advantage.

Multiple Choice

What should the terms of trade be to be mutually beneficial?

1 car exchanged for 2/5 < ___ < 2 shoes

• 1

• 4

• 1/5

Open Ended

How do the production possibilities curves (PPC) and consumption possibilities curves (CPC) illustrate the benefits of trade between Germany and Italy?

Multiple Select

Select all statements that correctly describe the outcomes of specialization and trade between Country A and Country B.

• Country A will export wheat and import corn.

• Country B will export corn and import wheat.

• Both countries will benefit from trade.

• Country A will benefit more from trade than Country B.