#1
Which concept suggests that a country should specialize in the production of goods and services that it can produce most efficiently?
Absolute advantage
Comparative advantage
Opportunity cost
Production possibility frontier
#2
In economics, what does the term 'opportunity cost' refer to?
The cost of purchasing opportunities
The cost of producing one additional unit of a good
The cost of producing a good or service
The value of the next best alternative forgone
#3
What is an example of a country benefiting from comparative advantage in international trade?
A country exporting all goods it produces without considering opportunity costs
A country producing only high-tech goods to dominate global markets
A country specializing in agricultural products while importing technology goods
A country producing all goods domestically to avoid dependency on other nations
#4
Who introduced the concept of comparative advantage?
Adam Smith
David Ricardo
John Maynard Keynes
Milton Friedman
#5
Which of the following is not a factor affecting comparative advantage?
Labor productivity
Climate
Technological advancement
Government regulations
#6
What is the formula for calculating comparative advantage?
Opportunity Cost of Good A / Opportunity Cost of Good B
Opportunity Cost of Good A * Opportunity Cost of Good B
Opportunity Cost of Good A + Opportunity Cost of Good B
Opportunity Cost of Good A - Opportunity Cost of Good B
#7
What is the key assumption of the theory of comparative advantage?
There are no transaction costs associated with trade.
Countries have different resources and technology.
Countries aim to maximize their own production.
There is perfect competition in the market.
#8
In the context of comparative advantage, what is 'autarky'?
A situation where a country only produces goods it can consume domestically.
A situation where a country produces all the goods it consumes domestically without trading.
A situation where a country relies heavily on imports for all its needs.
A situation where a country has an absolute advantage in all goods.
#9
What is the difference between absolute advantage and comparative advantage?
Absolute advantage considers the opportunity cost, while comparative advantage does not.
Absolute advantage compares production efficiencies, while comparative advantage considers opportunity costs.
There is no difference; the terms are interchangeable.
Absolute advantage is a theoretical concept, while comparative advantage is practical.
#10
What does the law of comparative advantage state?
Countries should produce only what they can produce most efficiently
Countries should produce what they have an absolute advantage in
Countries should specialize in producing goods with the lowest opportunity cost
Countries should trade even if they have an absolute disadvantage in all goods
#11
In a hypothetical scenario, if Country A has an absolute advantage in producing both goods X and Y, and Country B has a comparative advantage in producing good X, what should be the optimal trade pattern?
Country A should produce both goods X and Y, and Country B should not trade.
Country A should produce both goods X and Y, and Country B should only produce good Y.
Country A should only produce good Y, and Country B should produce both goods X and Y.
Country A should only produce good Y, and Country B should specialize in producing good X.
#12
What is the relationship between comparative advantage and gains from trade?
Countries gain from trade only if they have an absolute advantage in all goods.
Countries gain from trade when they specialize according to their comparative advantage.
Countries gain from trade only if they can produce all goods more efficiently than their trading partners.
Countries gain from trade when they produce goods with the highest opportunity cost.
#13
How does specialization based on comparative advantage affect global efficiency?
It decreases global efficiency as countries focus on producing only a few goods.
It increases global efficiency by allowing countries to produce goods where they have a comparative advantage.
It has no impact on global efficiency as it only benefits individual countries.
It leads to inefficiency as countries compete to produce the same goods.
#14
How does comparative advantage lead to mutual gains from trade?
Countries can trade goods even if they have no advantages in production.
Countries can specialize according to their strengths and trade for goods they don't produce efficiently.
Countries can increase production costs by focusing on goods they produce less efficiently.
Countries can achieve self-sufficiency by avoiding international trade.
#15
How does technological advancement impact comparative advantage?
It diminishes the importance of comparative advantage in international trade.
It allows countries to produce more goods without considering opportunity costs.
It enables countries to specialize in new industries, altering their comparative advantage.
It has no impact on comparative advantage.