Comparative and Absolute Advantage Concepts

The video explores why countries engage in international trade, focusing on the concepts of absolute and comparative advantage. It explains how countries can benefit from specializing in goods where they have a comparative advantage, leading to increased total output. The video uses examples to illustrate these concepts and discusses the necessity of trade for enjoying a variety of goods.

Why do countries engage in international trade instead of producing everything domestically?

• To increase the variety of goods available

• To reduce the cost of production

• To avoid political conflicts

• To increase domestic employment

What is the term for when a country can produce more of a good with the same resources compared to another country?

• Comparative advantage

• Absolute advantage

• Economic advantage

• Resource advantage

In the example given, which country has an absolute advantage in producing both computers and cameras?

• Country A

• Country B

• Neither country

• Both countries

What does comparative advantage focus on when comparing two countries?

• The level of technology used

• The amount of resources available

• The opportunity cost of producing goods

• The total output of goods

Which country has a comparative advantage in producing computers in the given example?

• Country B

• Country A

• Both countries

• Neither country

What is the opportunity cost for Country B to produce one camera?

• Two computers

• One computer

• Three computers

• One third of a computer

What happens to the total output when countries specialize in goods for which they have a comparative advantage?

• It increases

• It fluctuates

• It remains the same

• It decreases

In the specialization example, which country should focus on producing clothes?

• Neither country

• Both countries

• Country B

• Country A

Why is trade necessary even after countries specialize according to their comparative advantages?

• To maintain political alliances

• To enjoy a variety of goods

• To increase employment

• To reduce environmental impact

What must countries do before specializing to ensure beneficial trade?

• Increase tariffs

• Negotiate trade agreements

• Reduce production

• Increase resource allocation