Absolute and Comparative Advantage Concepts

The video tutorial explains the concepts of absolute and comparative advantage. Absolute advantage is the ability to produce more of a good or service than others in the same time. Comparative advantage involves producing at a lower opportunity cost. The tutorial uses examples to illustrate these concepts, including the production of avocados and soybeans by Mexico and the US. It explains how to calculate opportunity costs and determine specialization for trade. The video also distinguishes between input and output problems and provides shortcuts for solving comparative advantage problems.

What is the definition of absolute advantage?

• The ability to produce more of a good or service than someone else in the same amount of time.

• The ability to trade goods and services efficiently.

• The ability to produce something at a lower opportunity cost than someone else.

• The ability to produce a good using fewer resources.

Which country has an absolute advantage in avocado production according to the given tables?

• Both countries

• United States

• Neither country

• Mexico

What is comparative advantage?

• The ability to produce more of a good or service than someone else in the same amount of time.

• The ability to produce something at a lower opportunity cost than someone else.

• The ability to produce a good using fewer resources.

• The ability to trade goods and services efficiently.

Why might it make sense for the United States to trade with Mexico despite having an absolute advantage in both goods?

• Because of comparative advantage.

• Because of absolute advantage.

• Because Mexico has a higher opportunity cost.

• Because the United States has a higher opportunity cost.

What is the opportunity cost for the United States to produce one unit of avocados?

• 4 units of soybeans

• 3 units of soybeans

• 1/4 of a unit of soybeans

• 1/3 of a unit of soybeans

Which country should specialize in growing soybeans based on lower opportunity cost?

• Neither country

• Both countries

• United States

• Mexico

In an input problem, what do the numbers in the grid represent?

• Units of time spent

• Units of output produced

• Units of goods traded

• Units of resources used

If Anna takes 100 hours to produce potatoes and 200 hours to produce cabbage, what is her opportunity cost for producing one unit of potatoes?

• 1 unit of cabbage

• 1/2 unit of cabbage

• 2 units of cabbage

• 1/4 unit of cabbage

What is the shortcut method used to solve comparative advantage problems?

• Dividing opportunity costs

• Subtracting opportunity costs

• Adding opportunity costs

• Cross multiplying

In an output problem, what is the goal?

• To minimize inputs

• To maximize inputs

• To minimize outputs

• To maximize outputs