Comparative Advantage Practice

Jacob Clifford explains the concept of comparative advantage, a key topic in economics classes. The video covers four essential skills: identifying absolute advantage, calculating opportunity cost, determining comparative advantage, and understanding terms of trade. Through practice scenarios, students learn to apply these concepts, understanding that specialization and trade can benefit countries. The video emphasizes the importance of practice and provides examples to solidify understanding.

What is the primary reason for studying comparative advantage in economics?

• To identify the richest countries.

• To learn how to produce more goods.

• To calculate the GDP of a country.

• To understand the benefits of trade between countries.

Which of the following best describes absolute advantage?

• The ability to trade goods without tariffs.

• The ability to produce more of a good using the same resources.

• The ability to produce a good at a lower opportunity cost.

• The ability to produce goods with higher quality.

In the context of absolute advantage, what does it mean if a country can produce a good using fewer resources?

• The country has a higher opportunity cost.

• The country has an absolute advantage.

• The country has a comparative advantage.

• The country should import the good.

How is the per unit opportunity cost calculated?

• By adding the total cost and total gain.

• By subtracting the total gain from the total cost.

• By multiplying the total cost by the total gain.

• By dividing the total cost by the total gain.

What is the opportunity cost of producing one plane if a country can produce 20 planes or 2 cruise ships?

• 1/10 of a cruise ship

• 10 cruise ships

• 2 cruise ships

• 1 cruise ship

Which country should specialize in producing a good according to comparative advantage?

• The country with the most resources.

• The country with the lower opportunity cost.

• The country with the highest GDP.

• The country with the higher production capacity.

If France has a lower opportunity cost in producing cruise ships, what should it do?

• Stop trading with other countries.

• Specialize in producing planes.

• Specialize in producing cruise ships.

• Increase the production of both goods.

What is the concept of terms of trade?

• The tariffs imposed on traded goods.

• The total volume of trade between two countries.

• The range of trade that benefits both countries.

• The exchange rate between two currencies.

Why would a country not agree to a trade where it gives up more than its opportunity cost?

• It would be more beneficial to produce the good itself.

• It would increase its GDP.

• It would lose its absolute advantage.

• It would have to pay higher tariffs.

If a country can produce a good at a lower opportunity cost, what does it have?

• A higher GDP

• A trade surplus

• A comparative advantage

• An absolute advantage