Economics of trade

Question 1

Absolute Advantage

Answer 1

The ability of one country to use its resources to make a product or service more efficiently than other countries
Examples:
- Producing a good at lower cost or higher rate of productivity
- Canada has absolute advantage in producing forest products
- Zambia has absolute advantage in producing copper

Question 2

Absolute Advantage l

Answer 2

• Countries export products or services in which they have an absolute advantage
• Countries import products or services in which other countries have an absolute advantage

Question 3

Opportunity Cost

Answer 3

The value of what is foregone, or the cost of giving something up to get something else.
Example:
The opportunity cost of being in class is the money a student could earn working at a job.
The opportunity cost of having breakfast at Tim Horton’s is not having it at McDonald’s

Question 4

Comparative Advantage

Answer 4

The ability of a country to produce a good at a lower opportunity cost than another country.
Comparative advantage is the foundation for specialization and trade
ex. Specializing in what you do well at a reasonable rate
China has a comparative advantage in production of toys because of inexpensive labour