Economic theory suggest which of the following is true regarding comparative advantage and absolute advantage?Question 9Select one:a.when a country has an absolute advantage in producing two goods, it will also have a comparative advantage in producing those goods.b.a country gains economically if it concentrates its efforts in those economic activities where it has the greatest advantage or the least disadvantage, and then trades with other countries for those goods it doesn’t.c.a country with an absolute advantage in producing all goods will be better off by producing all goods in equal quantity.d.comparative advantage has nothing to do with determining what a country should produce.e.comparative and absolute advantage mean the same thing in international trade.
Question
Economic theory suggest which of the following is true regarding comparative advantage and absolute advantage?Question 9Select one:a.when a country has an absolute advantage in producing two goods, it will also have a comparative advantage in producing those goods.b.a country gains economically if it concentrates its efforts in those economic activities where it has the greatest advantage or the least disadvantage, and then trades with other countries for those goods it doesn’t.c.a country with an absolute advantage in producing all goods will be better off by producing all goods in equal quantity.d.comparative advantage has nothing to do with determining what a country should produce.e.comparative and absolute advantage mean the same thing in international trade.
Solution
The correct answer is b. A country gains economically if it concentrates its efforts in those economic activities where it has the greatest advantage or the least disadvantage, and then trades with other countries for those goods it doesn’t.
This statement is in line with the theory of comparative advantage, which suggests that countries should specialize in producing goods and services where they have a lower opportunity cost and then engage in trade. This way, they can gain access to goods and services they need at a lower cost than if they produced them domestically.
The other options are incorrect because:
a. Having an absolute advantage in producing two goods does not necessarily mean a country will also have a comparative advantage in producing those goods. Comparative advantage is about producing goods at a lower opportunity cost, not necessarily about producing more of them.
c. A country with an absolute advantage in producing all goods will not necessarily be better off by producing all goods in equal quantity. It would be more beneficial for the country to focus on producing goods where it has a comparative advantage.
d. Comparative advantage is a key concept in determining what a country should produce. It suggests that countries should specialize in producing goods where they have a lower opportunity cost.
e. Comparative and absolute advantage do not mean the same thing in international trade. Absolute advantage refers to the ability to produce more of a good or service with the same amount of resources, while comparative advantage refers to the ability to produce a good or service at a lower opportunity cost.
Similar Questions
The theory of comparative advantage demonstrates that even if a country is less efficient than another in producing all goods, it can still benefit from trade by specializing in the production of the good in which it has: A. The highest absolute advantage B. The lowest opportunity cost C. The highest total production D. The lowest absolute cost
In general, when there is free trade and nations produce and export goods and services for which they have comparative advantage, the global economy is better off.Absolute Advantage means that one nation (or individual) can produce more of a good or service than another. Another way of looking at it is to say that one nation (or individual) can produce a good or service using fewer inputs than another uses.Comparative Advantage, in contrast, looks at the opportunity cost a nation (or individual) experiences when producing a good. When one item is produced, something else is given up – but how much? For example, if a nation produces only pickup trucks and pineapples, comparative advantage depends on how many pickup trucks are given up to produce a unit of pineapples, and vice versa. Comparative advantage helps us determine whether it is beneficial for two nations or individuals to specialize and trade.
Which of the following conditions signify Comparative Advantage?a.When a country can produce goods at low cost.b.When a country can produce goods at low taxes.c.When a country can produce goods at low opportunity cost.d.When a country can transport goods at low cost.
Absolute advantage is:Question 14Select one:a.A tax on imported goods.b.The value of merchandise exports minus the value of merchandise imports.c.When an individual, region, or nation is relatively superior in producing certain goods because of lower opportunity costs, and gains by trading for goods that another is relatively more proficient at producing.d.The ability to produce a greater physical output with a given set of resources than a similar set of resources can produce somewhere else.e.when a country places a limit on the amount of a commodity that can be imported.
Which situation best illustrates the concept of absolute advantage?A.A software company is forced to increase its prices to pay for rising labor costs.B.A restaurant buys its ingredients from nearby farms to help the local economy.C.A factory in Vietnam can produce more shoes than other countries.D.The total value of U.S. exports is lower than the value of the country's imports
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