comparative advantage

Which of the following best describes the theory of comparative advantage?

• The ability of a country to produce a good at a lower absolute cost than another country

• The ability of a country to produce a good at a lower opportunity cost than another country

• The advantage of a country to produce all goods more efficiently than another country

• The theory that all countries should specialize in the same goods to maximize global output

According to the theory of comparative advantage, countries gain from trade when they:

• Produce only goods for which they have the absolute advantage

• Trade only with countries that have lower costs of production

• Specialize in goods where they have a comparative advantage

• Avoid specialization to maintain economic independence

Which economist is most closely associated with developing the theory of comparative advantage?

• Adam Smith

• John Maynard Keynes

• David Ricardo

• Milton Friedman

Country A can produce 10 tons of rice or 20 tons of wheat per year, while Country B can produce 15 tons of rice or 15 tons of wheat per year. According to comparative advantage, which product should Country A specialize in?

• Rice

• Wheat

• Both

• Neither

In the context of comparative advantage, opportunity cost refers to:

• The total cost of producing a good

• The trade-off of producing one good over another

• The cost of labor in producing a good

• The profit made from producing a good

What is a key implication of comparative advantage in international trade?

• Countries should aim for self-sufficiency to avoid trade deficits

• Trade restrictions benefit countries by protecting local industries

• Free trade allows countries to specialize and increase total output

• Comparative advantage leads to increased competition and less trade

Suppose Country X can produce either 200 units of cloth or 50 units of steel with the same resources, while Country Y can produce either 100 units of cloth or 20 units of steel. Which country has a comparative advantage in cloth?

• Country X

• Country Y

• Both have equal comparative advantage

• Neither

Which of the following statements is true about comparative and absolute advantage?

• A country with an absolute advantage in all goods can also have a comparative advantage in all goods.

• A country can benefit from trade only if it has a comparative advantage in all goods.

• Comparative advantage focuses on relative opportunity costs, not on overall productivity.

• Absolute advantage is more important than comparative advantage in determining trade benefits.

Which outcome is most likely if countries follow the principle of comparative advantage in their trade decisions?

• Increased protectionism to maintain local jobs

• . Increased specialization and efficiency

• Less global trade due to specialized production

• Reduction in global output due to fewer products being made

If two countries specialize based on comparative advantage and engage in trade, the result is usually:

• A decrease in total world production

• An increase in consumer choice and variety

• Lower production efficiency for both countries

• A higher cost of goods in both countries