International Trade Concepts and Advantages

The lecture explores international trade, focusing on why countries trade and the concepts of absolute and comparative advantage. It explains opportunity cost and how it influences trade decisions. Using examples of Canada, Japan, and Niger, the lecture illustrates how countries benefit from specializing in goods where they have a comparative advantage, even if one country is more efficient in producing all goods. The session concludes with a discussion on identifying countries with an absolute advantage in labor and the importance of trade relationships.

What are some benefits of international trade mentioned in the lecture?

• Increasing consumer choice and satisfaction

• All of the above

• Improving the standard of living

• Path to world peace

Why do countries trade even if they have similar resources?

• To improve their climate

• To increase their population

• To change their political system

• Due to economic reasons

What is opportunity cost?

• The cost of the next best alternative foregone

• The cost of labor

• The cost of raw materials

• The cost of producing goods

In the context of trade, what does absolute advantage refer to?

• The ability to trade without tariffs

• The ability to produce goods at a lower cost

• The ability to produce a good more efficiently than another country

• The ability to produce more of all goods

According to the lecture, which country has an absolute advantage in producing automobiles?

• Mexico

• Canada

• Niger

• Japan

What is the main factor that determines comparative advantage?

• Political stability

• Higher GDP

• Lower opportunity cost

• Absolute production capacity

Why might a country with an absolute advantage in all goods still engage in trade?

• To change its political system

• Due to comparative advantage

• To improve its climate

• To increase its population

What did David Ricardo contribute to the theory of international trade?

• The concept of trade tariffs

• The concept of comparative advantage

• The concept of opportunity cost

• The concept of absolute advantage

How does specialization relate to comparative advantage?

• It reduces the need for trade

• It increases the cost of production

• It allows countries to focus on producing goods with lower opportunity costs

• It leads to political instability

What should countries with an absolute advantage in labor focus on according to the lecture?

• Increasing tariffs

• Reducing population

• Identifying trade partners

• Improving political relations