Review Chapter 3

In the context of competitive advantage, the value of the first-best choice represents the opportunity cost of producing a second product.

• True

• False

Despite their huge populations, China and India represent a much smaller opportunity in terms of size and economic growth.

• True

• False

A country has an absolute advantage when it can produce more of a good than other nations, using the same amount of resources.

• True

• False

Although a trade deficit signals the wealth of an economy that can afford to buy huge amounts of foreign products, a large deficit can be destabilizing.

• True

• False

The balance of trade is also referred to as countertrade.

• True

• False

The balance of trade plays a central role in determining the balance of payments.

• True

• False

Balance of trade incorporates trade with all foreign nations.

• True

• False

A disadvantage of foreign outsourcing is higher wages.

• True

• False

Despite the growth rates in many high-population countries being weak, most of these nations remain ahead of the United States in terms of development and prosperity.

• True

• False

In the context of global trade, the exchange rate can directly measure global commerce.

• True

• False