ECON 103 Lecture Notes - Lecture 5: Absolute Advantage, Comparative Advantage, Opportunity Cost

32 views1 pages

greenfrog170

18 Sep 2015

School

University of Victoria

Department

Economics

Course

ECON 103

Professor

Hutchinson Emma

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Absolute advantage: the comparison among producers of a good according to their productivity. The producer that requires a smaller quantity of inputs (ex. Time) is said to have an absolute advantage. Comparative advantage: the comparison among producers of a good according to their opportunity cost. When making a how much decision, we need to break it down into yes or no questions (binary decisions) this is called marginal decision making: each step requires us to compare marginal benefit to marginal cost. If mb mc, we should do it: marginal net benefit= mb mc.

Related Questions

nathan and Jennifer grow strawberries and raspberries.

Nathan has a comparative advantage in growingstrawberries if

A. Nathan can produce for himself all the fruit he wants.Nathan can produce for himself all the fruit he wants.

B.Nathan's opportunity cost of producing raspberries is greater than Jennifer's opportunity cost of producing raspberries.Nathan's opportunity cost of producing raspberries is greater than Jennifer's opportunity cost of producing raspberries.

C. Nathan can grow more strawberries than Jennifer.Nathan can grow more strawberries than Jennifer.

D.Nathan's opportunity cost of strawberries is less than his opportunity cost of raspberries.Nathan's opportunity cost of strawberries is less than his opportunity cost of raspberries.

If Nathan also has an absolute advantage in growing strawberries and raspberriesâ, he will

A. be a better farmer than Jennifer.be a better farmer than Jennifer.

B. have a comparative advantage one activity but not both.have a comparative advantage one activity but not both.

C.have an equal opportunity cost in all activities.have an equal opportunity cost in all activities.

D.be unable to trade with Jennifer.be unable to trade with Jennifer.

what is a key factor that determines a firm's profitability?

A differentiation of a firm's product from other products

B factors affecting a firm's entire market

C a firm's average cost of production relative to that of competing firms

D chance events

E all of the above

economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage (and less of that for which a country does not have a comparative advantage). However, countries rarely specialize completely, why?

even with international trade, countries rarely specialize completely because

A, all goods and services can be traded internationally

B, some countries would lose as a result of free trade

C, consumers in different countries have homogeneous tastes

D, some countries do not have an absolute advantege producing anything

E, production of most goods involves increasing opportunity costs.

(1) Implicit costs are the opportunity costs of using the resources of ---------------------------------------------

a. outsiders.

b. banks.

c. retained earnings.

d. owners.

(2) The Principle of Comparative Advantage implies that:

a. Two countries can benefit from trade only if one country is better at producing a good compared to another in absolute terms.

b. Two countries can benefit from specialization and trade even if one country is better at one good compared to another in absolute terms.

c. all countries should specialize in whatever they have a higher opportunity cost to producing.

d. all countries are better off when each produces all goods for themselves and they do not trade with each other.

(3) Points inside a production possibilities frontier represent

a. unemployment of resources

b. unattainable production combinations

c. efficient use of resources

d. supply exceeds demand

(4) In a free market --------------------------------

a. governments intervene

b. governments plan production

c. governments interfere

d. prices adjust to reconcile scarcity and desires

crimsonmarten898

ECON 103 Lecture Notes - Lecture 5: Absolute Advantage, Comparative Advantage, Opportunity Cost

Document Summary

Get access

Related Documents

ECON 103 Lecture Notes - Lecture 4: Absolute Advantage, Comparative Advantage, Opportunity Cost

ECON 103 Lecture Notes - Lecture 4: Economic Surplus, Demand Curve, Comparative Advantage

ECON 103 Final: ECON 103 Final Exam

Related Questions