Understanding Trade and Advantage

Country A can produce 10 units of wheat or 5 units of cloth with the same resources, while Country B can produce 8 units of wheat or 4 units of cloth with the same resources. Which country has the absolute advantage in producing wheat?

• Country A

• Country B

• Both countries have the same advantage

• Neither country has an advantage

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DOK Level 3: Strategic Thinking

Given the production possibilities of two countries, how would you determine which country should specialize in which good to maximize gains from trade?

• By comparing the absolute advantages

• By comparing the opportunity costs

• By comparing the total production

• By comparing the consumption preferences

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DOK Level 3: Strategic Thinking

If Country X can produce 20 units of cars or 10 units of computers, and Country Y can produce 15 units of cars or 15 units of computers, which country has the absolute advantage in producing computers?

• Country X

• Country Y

• Both countries have the same advantage

• Neither country has an advantage

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DOK Level 3: Strategic Thinking

Explain how the concept of absolute advantage differs from comparative advantage using an example involving two countries and two goods.

• Absolute advantage focuses on the total output, while comparative advantage focuses on opportunity costs.

• Absolute advantage focuses on opportunity costs, while comparative advantage focuses on total output.

• Absolute advantage and comparative advantage are the same.

• Absolute advantage is irrelevant in trade theory.

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DOK Level 3: Strategic Thinking

Country A can produce 50 units of good X or 25 units of good Y, while Country B can produce 30 units of good X or 30 units of good Y. Which country has the absolute advantage in producing good Y?

• Country A

• Country B

• Both countries have the same advantage

• Neither country has an advantage

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DOK Level 3: Strategic Thinking

If two countries, A and B, are trading based on their comparative advantages, what would be the expected outcome in terms of their production and consumption?

• Both countries will produce and consume more than they would in isolation.

• Both countries will produce and consume less than they would in isolation.

• One country will benefit while the other will not.

• There will be no change in production and consumption.

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DOK Level 3: Strategic Thinking

Country A can produce 100 units of good X or 50 units of good Y, while Country B can produce 80 units of good X or 40 units of good Y. Which country has the absolute advantage in producing good X?

• Country A

• Country B

• Both countries have the same advantage

• Neither country has an advantage

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DOK Level 3: Strategic Thinking

How does the concept of absolute advantage help in determining the efficiency of resource allocation between two countries?

• It helps identify which country can produce more of a good with the same resources.

• It helps identify which country has lower opportunity costs.

• It helps identify the consumption preferences of each country.

• It helps identify the trade barriers between countries.

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DOK Level 3: Strategic Thinking

Country A can produce 60 units of good X or 30 units of good Y, while Country B can produce 40 units of good X or 20 units of good Y. Which country has the absolute advantage in producing good Y?

• Country A

• Country B

• Both countries have the same advantage

• Neither country has an advantage

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DOK Level 3: Strategic Thinking

Discuss the role of absolute advantage in the context of international trade and how it influences trade decisions between countries.

• Absolute advantage determines which country can produce a good more efficiently, influencing trade decisions.

• Absolute advantage is irrelevant in international trade.

• Absolute advantage only affects domestic trade.

• Absolute advantage is the same as comparative advantage.

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DOK Level 3: Strategic Thinking