Unit 5 - Absolute vs. Comparative Advantage

Comparative advantages show:

• outcomes without trading

• who can make more items

• competition within countries

• who should produce what item at the lowest cost

What type of advantage shows who can make the most item?

• absolute advantage

• comparative advantage

Joy gives 2 haircuts and 1 perm. Susie gives 3 haircuts and 2 perms. Who has the absolute advantage for haircuts?

• Joy

• Susie

True or False: It is better for countries to specialize and conduct trades given comparative advantage data.

• True

• False

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

• Imports
• Exports
• Specialization
• Globalization

The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the absolute advantage in producing airplanes? 

• Japan
• US

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

The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the comparative advantage in producing airplanes and what is their opportunity cost? 

• Japan, 1/3 trucks per airplane
• US, 1/2 trucks per airplane
• US, 2 trucks per airplane
• Japan, 3 trucks per airplane

The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the comparative advantage in producing trucks and what is their opportunity cost? 

• Japan, 1/3 airplane per truck
• US, 1/2 airplane per truck
• US, 2 airplanes per truck
• Japan, 3 airplanes per truck

The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the absolute advantage in producing airplanes? 

• Japan
• US