Unit 3 (Interdependence and the Gains From Trade)

Question 1

Why would a PPF be linear?

Answer 1

It signifies constant opportunity cost the whole PPF line

Question 2

Why would a PPF be bowed outwards?

Answer 2

It signifies rising opportunity cost, as you get further down the PPF the opportunity costs jumps more and more.

Question 3

Define comparative advantage

Answer 3

When a producer can manufacture something with a lower opportunity cost than another producer

Question 4

Define absolute advantage

Answer 4

When one producer can manufacture more of one good than another producer (using less materials)

Question 5

What advantage is best for trade?

Answer 5

Comparative advantage allows countries to trade with other countries what they specialize best in (what they have the lowest opportunity cost in)

Question 6

Input questions

Answer 6

OTHER GOES UNDER! (I: input, O: other goes, U: under)

Question 7

Output questions

Answer 7

OTHER GOES OVER (O: output, O: other goes, O: over)

Question 8

Does trade benefit everyone?

Answer 8

No, some companies producing the same thing being brought into the country want tariffs on that item