currency of A,
the comparative advantage will shift to an absolute advantage.
trade will be an improved outcome for both A and B.
the comparative advantage could be canceled out.
none of the options
References
Multiple Choice Difficulty: 1 Easy
Comparative advantage
is also known as relative efficiency.
can lead to trade even in the face of absolute efficiency.
exists when one party can produce a good or service at a lower opportunity cost than another party.
all of the options
References
Multiple Choice Difficulty: 1 Easy
65.
Award: 1.00 point
66.
Award: 1.00 point
Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Country B can produce 8 yards of textiles
or 5 pounds of food per unit of input. Which of the following statements is true?
Country A is relatively more efficient than Country B in the production of food.
Country B is relatively more efficient than Country A in the production of textiles.
Country A is relatively more efficient than Country B in the production of textiles.
none of the options
To find the opportunity cost of producing one additional pound of food for either country, divide the textile output by food
output for each country for one unit of production. For Country A, it costs 10/6 = 1.67 yards of textiles to produce one
additional pound of food, and for Country B, it costs 8/5 = 1.6 yards of textiles to produce one additional pound of food.
Thus, Country B is relatively more efficient than Country A in producing food as evidenced by the fact that 1.6 < 1.67. To find
the opportunity cost of producing one additional yard of textiles for either country, divide the food output by textile output
for each country for one unit of production. For Country A, it costs 6/10 = 0.6 pounds of food to produce one additional yard
of textiles, and for Country B, is costs 5/8 = 0.625 pounds of food to produce one additional yard of textiles. Thus, Country
A is relatively more efficient than Country B in producing textiles, as evidenced by the fact that 0.6 < 0.625.
References
Multiple Choice Difficulty: 2 Medium
Underlying the theory of comparative advantage are assumptions regarding
free trade between nations.
that the factors of production (land, labor, capital, and entrepreneurial ability) are relatively immobile.
that the factors of production (land, labor, capital, and entrepreneurial ability) are relatively mobile.
free trade between nations and that the factors of production (land, labor, capital, and entrepreneurial ability) are
relatively immobile.
References
Multiple Choice Difficulty: 1 Easy
67.
Award: 1.00 point
68.
Award: 1.00 point
If one country is twice the size of another country and is better at making almost everything than the benighted citizens of
the smaller country,
the bigger country enjoys an absolute advantage.
the bigger country enjoys an relative advantage.
the bigger country enjoys a comparative advantage.
there is not enough information to make a determination.
References
Multiple Choice Difficulty: 1 Easy
Country A can produce 10 yards of textiles or 6 pounds of food per unit of input. Country B can produce 8 yards of textiles
or 5 pounds of food per unit of input.
Country A is relatively more efficient than Country B in the production of food.
Country B is relatively more efficient than Country A in the production of food.
Country A has an absolute advantage over Country B in the production of food and textiles.
Country B is relatively more efficient than Country A in the production of food, but Country A has an absolute
advantage over Country B in the production of food and textiles.
To find the opportunity cost of producing one additional pound of food for either country, divide the textile output by food
output for each country for one unit of production. For Country A, it costs 10/6 = 1.67 yards of textiles to produce one
additional pound of food, and for Country B, it costs 8/5 = 1.6 yards of textiles to produce one additional pound of food.
Thus, Country B is relatively more efficient than Country A in producing food as evidenced by the fact that 1.6 < 1.67. To find
the opportunity cost of producing one additional yard of textiles for either country, divide the food output by textile output
for each country for one unit of production. For Country A, it costs 6/10 = 0.6 pounds of food to produce one additional yard
of textiles, and for Country B, is costs 5/8 = 0.625 pounds of food to produce one additional yard of textiles. Thus, Country