Comparative Advantage Quiz

What is opportunity cost?

• The value of the chosen alternative

• The value of the next best alternative that is forgone when making a decision.

• The cost of a decision

• The cost of an opportunity

Define specialization.

• The act of broadening one's knowledge in various areas of study.

• The process of becoming a generalist in multiple fields.

• The process of focusing on a specific area or field of study or expertise.

• The act of focusing on a specific area or field of study or expertise.

What are trade-offs?

• Benefits or advantages gained when choosing one option over another.

• Sacrifices or compromises made when choosing one option over another.

• The process of exchanging goods or services between two or more parties.

• The act of making a decision without considering the consequences.

Explain the concept of production possibilities frontier.

• The production possibilities frontier represents the minimum output combinations an economy can achieve given its resources and technology.

• The production possibilities frontier represents the maximum output combinations an economy can achieve given unlimited resources and technology.

• The production possibilities frontier represents the maximum output combinations an economy can achieve regardless of its resources and technology.

• The production possibilities frontier represents the maximum output combinations an economy can achieve given its resources and technology.

What is absolute advantage?

• Ability to produce a good or service at a lower cost or with higher efficiency than others.

• Ability to produce a good or service with no cost or efficiency advantage over others.

• Ability to produce a good or service with the same cost and efficiency as others.

• Ability to produce a good or service at a higher cost or with lower efficiency than others.

How does opportunity cost relate to comparative advantage?

• Opportunity cost is only relevant in the context of production, not trade.

• Comparative advantage is based on absolute advantage, not opportunity cost.

• Opportunity cost is the basis for determining comparative advantage.

• Opportunity cost has no relation to comparative advantage.

Give an example of specialization in the real world.

• Dentist

• Plumber

• Teacher

• Cardiologist

What factors can influence trade-offs?

• weather, geography, culture

• technology, market conditions, regulations

• cost, time, resources, priorities, risk

• demand, supply, competition

How does the production possibilities frontier illustrate scarcity?

• The production possibilities frontier illustrates scarcity by demonstrating the abundance of resources available to produce goods and services.

• The production possibilities frontier illustrates scarcity by showing the unlimited resources available to produce goods and services.

• The production possibilities frontier illustrates scarcity by indicating that resources are not limited and can be easily obtained to produce goods and services.

• The production possibilities frontier illustrates scarcity by showing the limited resources available to produce goods and services.

Differentiate between absolute advantage and comparative advantage.

• Absolute advantage is based on productivity, while comparative advantage is based on opportunity cost.

• Absolute advantage is based on opportunity cost, while comparative advantage is based on productivity.

• Absolute advantage is based on efficiency, while comparative advantage is based on specialization.

• Absolute advantage is based on cost, while comparative advantage is based on demand.