Exploring Absolute and Comparative Advantage in International Trade

What does it mean if a country has an absolute advantage in producing a product?

• It has exclusive technology for production.

• It can produce more quality products using the same resources as others.

• It has the largest market share for that product.

• It has the lowest production costs globally.

What role does absolute advantage play in international trade?

• It determines the tax rates on imported goods.

• It dictates the currency exchange rates.

• It sets the prices for goods in the international market.

• It identifies which country can produce a good most efficiently.

Why should countries specialize in products they can produce efficiently?

• To increase global competition.

• To enhance technological advancements.

• To maximize the overall economic benefit through trade.

• To focus solely on domestic needs.

What would be a consequence if countries did not trade based on their production efficiencies?

• There would be an inefficient allocation of global resources.

• Consumers would have access to cheaper products.

• Global economies would be more self-sufficient.

• Trade agreements would be simpler.

How does specializing in a product benefit a country's economy?

• By increasing dependency on other countries.

• By increasing the cost of goods.

• By making the production process more efficient.

• By reducing the variety of jobs available.

What is the main idea behind the theory of comparative advantage?

• To trade equally among all nations.

• To focus production on goods with the least opportunity cost.

• To compare the GDP of different countries.

• To produce everything domestically to avoid imports.

If South Africa can produce both wheat and DVDs efficiently, why should it still trade with Japan?

• Because it costs less in terms of opportunity cost for Japan to produce DVDs.

• To increase its exports only.

• To maintain diplomatic relations.

• To diversify its economic portfolio.

What does the opportunity cost refer to in the context of trade?

• The cost associated with the next best alternative foregone.

• The cost of importing goods from another country.

• The cost of not trading with other countries.

• The financial expenses incurred during production.

Why is it cheaper for Japan to produce DVDs compared to South Africa?

• Because Japan has a larger workforce.

• Because DVDs are more popular in Japan.

• Because the opportunity cost in terms of wheat is lower in Japan.

• Because Japan has more advanced technology.

In the context of the given example, why would South Africa focus on wheat production?

• Because it has a surplus of wheat seeds.

• Because wheat is more consumed domestically than DVDs.

• Because it has a larger area of arable land compared to Japan.

• Because it can produce wheat more efficiently than DVDs.