#1
What is comparative advantage in economics?
The ability of a country to produce a good at a lower opportunity cost than another country
The total quantity of goods and services produced in an economy
The amount of one good that must be given up to produce one more unit of another good
The price at which a good or service is offered for sale
#2
What is opportunity cost?
The cost of producing one additional unit of a good
The cost of consuming one additional unit of a good
The cost of producing a good in terms of the value of the next best alternative
The cost of consuming a good in terms of the value of the next best alternative
#3
What does the law of comparative advantage suggest about international trade?
Countries should only export goods in which they have an absolute advantage.
Countries should focus on producing goods in which they have a comparative disadvantage.
Countries should specialize in producing goods in which they have a comparative advantage and trade with other countries to obtain goods in which they have a comparative disadvantage.
Countries should not engage in international trade.
#4
Which of the following best describes the concept of absolute advantage?
The ability of a country to produce a good using fewer resources than another country.
The ability of a country to produce a good at a lower opportunity cost than another country.
The ability of a country to produce all goods and services domestically.
The ability of a country to engage in international trade.
#5
What does the law of comparative advantage imply about the distribution of production across countries?
Each country should produce all goods domestically to avoid dependence on imports.
Each country should specialize completely in producing goods for which it has an absolute advantage.
Each country should specialize in producing goods for which it has a comparative advantage.
Each country should produce goods only for its own consumption and not engage in trade.
#6
What is the primary assumption made when constructing a production possibilities curve (PPC)?
Resources are scarce and unlimited.
Opportunity costs are constant.
All resources are fully employed.
The economy is operating at full employment.
#7
In economics, what does a production possibilities frontier (PPF) illustrate?
The trade-offs faced by an individual when allocating resources
The maximum combination of goods and services that can be produced given current resources and technology
The point where production is most efficient
The total quantity of goods and services produced in an economy
#8
Which of the following is an implication of having comparative advantage in producing a good?
A country should produce all goods domestically
There is no need for international trade
A country can benefit from specializing in producing and exporting the good in which it has comparative advantage
A country should not engage in international trade
#9
What is the main difference between absolute advantage and comparative advantage?
Absolute advantage refers to the ability to produce more of a good using fewer resources, while comparative advantage refers to the ability to produce a good at a lower opportunity cost.
Absolute advantage refers to the ability to produce a good at a lower opportunity cost, while comparative advantage refers to the ability to produce more of a good using fewer resources.
Absolute advantage refers to the ability to produce a good without any resources, while comparative advantage refers to the ability to produce a good with limited resources.
Absolute advantage refers to the ability to produce all goods and services domestically, while comparative advantage refers to the ability to engage in international trade.
#10
What does the production possibility curve illustrate?
The various combinations of two goods that can be produced with limited resources and technology.
The total quantity of goods and services produced in an economy.
The point where production is most efficient.
The maximum output of a single good that can be produced given current resources and technology.
#11
What is the primary assumption behind the theory of comparative advantage?
Perfect competition exists in all markets.
Resources are fully and efficiently utilized in all economies.
Opportunity costs are constant and do not change.
There are differences in the opportunity costs of producing goods between countries.
#12
How does specialization based on comparative advantage benefit trading partners?
It allows each country to produce a wider variety of goods.
It ensures that each country only produces goods for which it has an absolute advantage.
It leads to inefficient allocation of resources.
It leads to increased total output and consumption for both trading partners.
#13
In economics, what is the law of increasing opportunity cost?
As production of a good increases, the opportunity cost of producing that good decreases
As production of a good increases, the opportunity cost of producing that good remains constant
As production of a good increases, the opportunity cost of producing another good also increases
As production of a good increases, the opportunity cost of producing another good decreases
#14
In economics, what does diminishing marginal returns refer to?
The principle that as the quantity of a good produced increases, the marginal utility of consuming that good decreases.
The principle that as more of a variable input is added to a fixed input, the additional output produced per unit of the variable input eventually decreases.
The principle that as the quantity of a good produced increases, the opportunity cost of producing that good decreases.
The principle that as more resources are allocated to producing one good, the opportunity cost of producing another good decreases.
#15
Which of the following is NOT a factor affecting comparative advantage?
Natural resources
Technological advancement
Labor productivity
Government regulations
#16
What happens to a country's production possibilities frontier (PPF) when it specializes according to comparative advantage and engages in trade?
It shifts inward.
It shifts outward.
It remains unchanged.
It becomes steeper.
#17
Which of the following is a potential drawback of specializing in accordance with comparative advantage?
Increased inefficiency due to lack of diversity in production.
Reduced dependence on international trade.
Decreased overall output and consumption.
Vulnerability to changes in global market conditions.
#18
In the context of comparative advantage, what does it mean if a country has an opportunity cost of production of 3 units of Good A for every 2 units of Good B?
The country should specialize in producing Good A.
The country should specialize in producing Good B.
The country has a comparative advantage in producing Good A.
The country has a comparative advantage in producing Good B.