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L11 Econ 1011 Lecture 2: Comparative Advantage

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oliveleopard31
31 Aug 2015
School
WUSTL
Department
University College - Economics
Course
L11 Econ 1011
Professor
Bandyopadhyay Sudeshna

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Document Summary

Specialization is more productive than non-specialization because of its comparative advantage. A person has a comparative advantage at producing a particular good or service is that person is relatively more ef cient at producing that good or service than other goods or services. Production possibilities curve: a graph that describes the maximum amount of one good than can be produced for every possible level of production of the other good. Absolute advantage: one person has an absolute advantage over another if he or she takes fewer hours to perform a task than the other person. Comparative advantage: one person has a comparative advantage over another if his or her opportunity cost of performing a task is lower than the other person"s opportunity cost. When two people (or two nations) have different opportunity costs of performing various tasks, they can always increase the total value of available goods and services by trading with one another.

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Related Questions

1. The law of comparative advantage says that:

A. whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good.

B. whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good

C. the individual with the lowest opportunity cost of producing a particular good should produce it

D. comparative advantage exists only when one person has an absolute advantage in the production of two goods

2. A country has an absolute advantage in the production of a good if that country:

A. can produce good using fewer resources than another country would require

B. has the lowest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources

C. has the greatest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources

D. has the lowest opportunity cost of producing the good and can produce it with the fewest resources

3. A production possibilities frontier can shift outward for all of the following reasons except:

A. a larger workforce

B. a decrease in the size of the labor force

C. an increase in the skills of the labor force

D. an improvement in technology

32) 32) A person has an absolute advantage in producing a good when he/she A) can produce the good at lower opportunity cost than anyone else. B) has a comparative advantage in producing that good. C) can produce more of that good than anyone else, using the same quantity of inputs. D) has better technology than anyone else. E) has exclusive rights to sell one good.

An economy is said to have a comparative advantage in the production of one good if it:

a) can produce more of all goods than another economy.

b) can produce less of all goods than another economy.

c) has the lowest opportunity cost for producing a particular good.

d) has the highest opportunity cost for producing a particular good.