Chapter 3 Interdependence And The Gains Of Trade

Question 1

Define Absolute Advantage

Answer 1

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

Question 2

Define Comparative Advantage

Answer 2

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

Question 3

Definen Imports

Answer 3

Goods and services that are produced abroad and sold domestically

Question 4

Define Exports

Answer 4

Goods and services that are produced domestically and sold abroad

Question 5

What is the principle of comparative advantage?

Answer 5

Each good should be produced by the individual that has the smaller opportunity cost of producing that good