Module 4: Comparitive Advantage & Trade

Question 1

Trade

Answer 1

They provide goods and services to others and receive goods and services in return

Question 2

Gains from trade

Answer 2

People can get more of what they want through trade than they could if they tried to be self-sufficient

Question 3

Specialization

Answer 3

Each person specializes in the task that he or she is good at performing

Question 4

Comparative advantage

Answer 4

An individual has a comparative advantage in producing a good or service if the opportunity cost of producing a good or service is lower for that individual than for other people

Question 5

Absolute advantage

Answer 5

An individual has absolute advantage in producing a good or service if her or she can make more of it