Specialization and Trade (2)

Question 1

Specialization

Answer 1

When people focus on what they do best instead of doing everything for themselves

Question 2

Trade

Answer 2

When people exchange one specialized service for another (I’ll make you a pizza if you make me a t-shirt!)

Question 3

Comparative Advantage

Answer 3

When your opportunity cost to produce something is lower than someone else’s

Question 4

Absolute Advantage

Answer 4

When you can produce more of a certain thing than someone else

Question 5

True or False (and why)? “International trade destroys domestic jobs.”

Answer 5

False. Because in trade, both parties end up better off.

Question 6

Why does trade leave both parties better off?

Answer 6

• I can focus on what I can make more of
• And you can focus on what you can make more of
• We both end up with more than we could make alone!

Question 7

Finish the sentence. “Economists agree that specialization in trade…”

Answer 7

“…makes everyone better off.”

Question 8

Finish the sentence. “Self sufficiency is…”

Answer 8

“…inefficiency (and inefficiency can lead to poverty).”