1.3 Comparative Advantage and Trade

The diagram shows the production possibilities curve for Country Y. Which of the following statements is true?

• If Country Y is producing at point C, it is using all its resources efficiently
• The opportunity cost of producing more machines is constant
• Country Y cannot produce at point E
• The most efficient point of production is point D

Labor, human capital, entrepreneurship, natural resources, and capital are all examples of which of the following?

• Outputs
• Substitutes in Production
• Absolute Advantage
• Factors of Production

The U.S. can produce 30 toys and 15 beds. Canada can produce 10 toys and 12 beds. Who has the absolute advantage in toys?

• Peru

• U.S.

• neither

• not enough info

A benefit, profit, or value of something that must be given up to acquire or achieve something else.

• Opportunity Cost
• Comparative Advantage
• Specialization
• Production

The nation's ability to produce more general goods than another entity is referred to as

• Specialization

• Comparative Advantage

• Opportunity Cost

• Absolute Advantage

To figure out a nation's comparative advantage, you compare their _________ to other entities

• Absolute Advantage

• Opportunity Cost

• Resource

• Revenue

A focus on developing only certain skills or producing only certain goods/services

• Imports
• Exports
• Specialization
• Globalization

Which of the following statements concerning trade is true?

• Trade tends to promote inefficient use of resources

• Nations should trade only when they have absolute advantage in producing a good or service

• Trade enables people to consume beyond their ability to produce and raises their living standards

• Trade should only occur when there is not an advantage to doing so