COMPARATIVE ADVANTAGE DCO 2023

The ability of a country to produce goods at a lower opportunity cost than another country is called

• Comparative advantage

• Absolute advantage

All of the followings are IMPORTANT assumptions in the absolute advantage theory EXCEPT

• There are only two countries world

• Goods produced are homogenous

• Free trade exists between these two countries

• No transportation costs are involved

Based on the table provided, which one of the following statements is correct?

• Japan has the absolute advantage in producing cars
• Japan has the comparative advantage in producing cars
• The United States has the absolute advantage in producing both cars and computers
• The opportunity cost of producing a car in Japan is 1/2 a computer

The producer that can produce the most output OR requires the least amount of inputs (resources)

• Comparative Advantage

• Trade Offs

• Absolute Advantage

• Opportunity Cost

Which country has the absolute advantage in producing airplanes? 

• Japan
• US

What is the opportunity cost of producing a car in the U.S.?

• 0.5 tools

• 0.5 cars

• 0.75 cars

• 1.3 tools

The U.S. can produce 10 iPad or 20 phones. China can produce 20 iPad or 30 phones. Who should produce what?

• U.S. - iPad

  China - phones

• U.S. - phones

  China- iPad

• both should produce iPad

• they should not specialize

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

• Imports
• Exports
• Specialization
• Globalization

Suppose that in one week Sam can knit 5 sweaters or make 4 blankets and Rob can knit 10 sweaters or make 6 blankets. Which of the following is true?

• Sam has an absolute advantage in making blankets
• Sam has neither a comparative nor an absolute advantage in knitting sweaters or making blankets
• Sam has a comparative advantage in making blankets
• Sam has a comparative advantage in knitting sweaters

Who has the comparative advantage in cake production?

• Sarah
• Mari