Lecture 4/ Chapter 3

Question 1

The producer that requires a smaller quantity of inputs to produce a good is said to have an

Answer 1

Absolute Advantage

Describes the productivity of one person, firm, or nation compared to that of another.

Question 2

The producer who has the smaller opportunity cost of producing a good is said to have a

Answer 2

Comparative Advantage

Question 3

Trade can benefit everyone in a society because

Answer 3

it allows people to specialize in activities in which they have a comparative advantage.

Question 4

Comparative advantage and differences in opportunity costs are

Answer 4

the basis for specialized production and trade.

Question 5

Comparative Advantage

Answer 5

The ability to produce a good at a lower opportunity cost than another producer

Question 6

Absolute Advantage

Answer 6

The ability to produce a good using fewer inputs than another producer