112-1 W4 Econ Ch3

If a nation has an absolute advantage in the production of a good,

• it can produce that good at a lower opportunity cost than its trading partner.

• it can produce that good using fewer resources than its trading partner.

• it can benefit by restricting imports of that good.

• it will specialize in the production of that good and export it.

If a nation has a comparative advantage in the production of a good,

• it can produce that good at a lower opportunity cost than its trading partner.

• it can produce that good using fewer resources than its trading partner.

• it can benefit by restricting imports of that good.

• it must be the only country with the ability to produce that good.

Which of the following statements about trade is true?

• People that are skilled at all activities cannot benefit from trade.

• Trade can benefit everyone in society because it allows people to specialize in activities in which they have a comparative advantage.

• Trade can benefit everyone in society because it allows people to specialize in activities in which they have an absolute advantage.

• Unrestricted international trade benefits every person in a country equally.

10. Refer to Figure 1. Alvina's opportunity cost of producing one unit of lemonade is _ units of pizzas.

(a)  

10. Refer to Figure 1. Betty’s opportunity cost of producing one unit of pizza is _ units of lemonade.

(a)  

Refer to Figure 1. Betty has an absolute advantage in producing

• lemonade

• pizza

• lemonade and pizza

• none

Refer to Figure 1. Alvina  has a comparative advantage in producing

• lemonade

• pizza

• lemonade and pizza

• none

10. Refer to Figure 1. At which of the following prices would both Alvina and Betty gain from trade?

• 7 units of lemonade for 5 units of pizza.

• 3 units of lemonade for 1 unit of pizza.

• 9 units of lemonade for 5 units of pizza.

• There are no circumstances under which both Alvina and Betty can benefit from specialization and trade.