PPC and Comparative Advantage

What does a shift outward of the PPC indicate?

• Increase in unemployment rates

• Increase in the economy's potential output

• Stagnation in the economy

• Decrease in the economy's potential output

Explain the concept of economic growth in relation to the PPC.

• Economic growth is represented by an outward shift of the PPC.

• Economic growth is only applicable in a closed economy.

• Economic growth is represented by a downward shift of the PPC.

• Economic growth has no impact on the PPC.

How does a country achieve a point beyond its current PPC?

• By isolating from international trade

• By decreasing resources and technology

• By ignoring education and training

• By increasing resources, improving technology, investing in education and training, and engaging in trade.

Discuss the impact of technological advancements on the PPC.

• Technological advancements can positively impact the PPC by increasing production efficiency and capacity, leading to economic growth.

• Technological advancements can only impact the PPC in the short term.

• Technological advancements have no impact on the PPC.

• Technological advancements can negatively impact the PPC by decreasing production efficiency and capacity, leading to economic decline.

Define comparative advantage in the context of the PPC.

• Ability of a country to produce a good or service at a lower opportunity cost than another country.

• Ability of a country to produce a good or service at the same opportunity cost as another country.

• Ability of a country to produce a good or service without considering opportunity cost.

• Ability of a country to produce a good or service at a higher opportunity cost than another country.

How does specialization lead to gains in comparative advantage?

• Specialization allows for the efficient allocation of resources and production of goods or services where there is a comparative advantage, leading to increased productivity and gains in trade.

• Specialization results in decreased productivity and trade gains

• Specialization does not impact comparative advantage

• Specialization leads to losses in comparative advantage

Explain the concept of opportunity cost in the PPC.

• Opportunity cost in the PPC is the value of the alternative that must be sacrificed in order to produce more of another good on the production possibilities curve.

• Opportunity cost is the same as sunk cost in the PPC.

• Opportunity cost does not impact the production possibilities curve.

• Opportunity cost only considers the monetary value of alternatives in the PPC.

What is the relationship between comparative advantage and trade?

• Comparative advantage leads to specialization and trade between countries.

• Comparative advantage only applies to domestic trade

• Trade eliminates the concept of comparative advantage

• Comparative advantage hinders trade by creating barriers

Discuss the role of resources allocation in determining comparative advantage.

• Resource allocation has no impact on comparative advantage

• Countries should not specialize based on resource allocation

• Resource allocation leads to inefficiency in production

• Resource allocation influences the efficiency and productivity of utilizing resources, leading countries to specialize in areas where they have a comparative advantage.

How can a country benefit from trading based on comparative advantage?

• By limiting trade with other countries to protect domestic industries.

• By focusing on producing goods or services they can produce more efficiently than other countries, leading to specialization, increased productivity, lower costs, and higher economic output.

• By ignoring the concept of comparative advantage and focusing on self-sufficiency.

• By producing goods or services they are not efficient at, leading to increased costs and lower economic output.