chapter 3 true and false Flashcards
If Japan has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item
false; absolute advantage compares the quantities of inputs used in production, while comparative advantage compares the opportunity costs
comparative advantage, not absolute advantage, determines the decision to specialize in production
true
absolute advantage is a comparison based on productivity
true
self-sufficiency is the best way to increase one’s material welfare
false,; restricting trade eliminates gains from trade
comparative advantage is a comparison based on opportunity cost
true
if a producer is self-sufficient, the PPF is also the consumption possibilities frontier
true
if a country’s workers can produce 6 pencils per hour or 18 rules per hour absent trade, the price of 1 rule is pencils
false; the price of 1 rules is one third of a pencil
if producers have different opportunity costs of production, trade will allow them to consume outside their production possibilities frontiers
true
countries import goods for which they have a comparative advantage
false; countries export goods in which they have a comparative advantage
hard work can enhance comparative advantage
true
the gains form trade can be measured by the increase in total production and consumption that comes form specialization
true
when a country removes a specific import restriction, it always benefits every worker in that country
false; it may harm those involved in that industry
Canada has a comparative advantage in the production of pulp and paper
true
if an advanced country has an absolute advantage in the production of everything, it will benefit if it eliminates trade with less developed countries and becomes completely self-sufficient
f; voluntary trade benefits all traders
if gains from trade are based solely on comparative advantage, and if all countries have the same opportunity costs of production, then there are no gains from trade.
true
