Chapter 3 : trade can make everyone better off

Question 1

what is absolute advantage

Answer 1

• compares the productivity of one person, firm or nation to another
• the producer that requires a smaller quantity of inputs to produce a good has absolute advantage at producing the good

Question 2

what is opportunity cost

Answer 2

whatever must be given up to obtain some item

Question 3

information per worker
Funland can produce 1 book and 10 pens
lifeland can produce 2 books and 16 pens

does either have absolute advantage

Answer 3

lifeland has absolute advantage

• they can make more books and pens per worker
• funland has absolute disadvantage

Question 4

what is comparative advantage

Answer 4

is the comparison among producing nations of a good according to their opportunity cost

Question 5

when does a nation have comparative advantage

Answer 5

when it can produce that good at a lower opportunity cost than another nation

Question 6

add more

Answer 6

add more