Chapter 3: Gains from Trade and Comparative Advantage

Question 1

without ___, the production possibilities frontier = the consumption possibilities frontier

Answer 1

trade

Question 2

absolute advantage=

Answer 2

someone has an absolute advantage in an activity if they can do it better than everyone else can
- uses the least amount of inputs

Question 3

t/f

absolute advantage gives us enough info to talk about trade

Answer 3

false

use comparative advantage

Question 4

comparative advantage=

Answer 4

someone has a comparative advantage in producing a good when they can produce that good at a lower opportunity cost than another person

Question 5

the benefits from trade and specialization are based on ___ advantage

Answer 5

comparative