#1
Which concept suggests that a country should specialize in the production of goods and services that it can produce most efficiently?
Comparative advantage
ExplanationCountries specialize in what they do best to maximize efficiency.
#2
In economics, what does the term 'opportunity cost' refer to?
The value of the next best alternative forgone
ExplanationOpportunity cost is the value of what you give up to choose something else.
#3
What is an example of a country benefiting from comparative advantage in international trade?
A country specializing in agricultural products while importing technology goods
ExplanationA country benefits when it specializes in what it does best and imports goods it doesn't produce efficiently.
#4
Who introduced the concept of comparative advantage?
David Ricardo
ExplanationDavid Ricardo first articulated the concept of comparative advantage.
#5
Which of the following is not a factor affecting comparative advantage?
Government regulations
ExplanationGovernment regulations do not affect comparative advantage.
#6
What is the formula for calculating comparative advantage?
Opportunity Cost of Good A / Opportunity Cost of Good B
ExplanationComparative advantage is calculated as the opportunity cost of one good divided by the opportunity cost of another.
#7
What is the key assumption of the theory of comparative advantage?
Countries have different resources and technology.
ExplanationThe theory assumes that countries differ in resources and technology.
#8
In the context of comparative advantage, what is 'autarky'?
A situation where a country produces all the goods it consumes domestically without trading.
ExplanationAutarky is when a country relies solely on its own resources without international trade.
#9
What is the difference between absolute advantage and comparative advantage?
Absolute advantage compares production efficiencies, while comparative advantage considers opportunity costs.
ExplanationAbsolute advantage focuses on efficiency, whereas comparative advantage considers opportunity costs.
#10
What does the law of comparative advantage state?
Countries should specialize in producing goods with the lowest opportunity cost
ExplanationCountries should focus on producing goods with the lowest opportunity cost.
#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 only produce good Y, and Country B should specialize in producing good X.
ExplanationOptimal trade pattern is where countries specialize according to their comparative advantage.
#12
What is the relationship between comparative advantage and gains from trade?
Countries gain from trade when they specialize according to their comparative advantage.
ExplanationSpecializing according to comparative advantage leads to gains from trade.
#13
How does specialization based on comparative advantage affect global efficiency?
It increases global efficiency by allowing countries to produce goods where they have a comparative advantage.
ExplanationSpecialization based on comparative advantage optimizes production and enhances global efficiency.
#14
How does comparative advantage lead to mutual gains from trade?
Countries can specialize according to their strengths and trade for goods they don't produce efficiently.
ExplanationComparative advantage allows countries to focus on what they do best and trade for other goods, benefiting all parties.
#15
How does technological advancement impact comparative advantage?
It enables countries to specialize in new industries, altering their comparative advantage.
ExplanationTechnological advancement reshapes comparative advantage by opening new opportunities for specialization.