Log in
HomeTextbook Notes300,000CA170,000

ECON 105 Chapter Notes - Chapter 3: Absolute Advantage, Comparative Advantage, Opportunity Cost

29 views2 pages
School
Simon Fraser University
Department
Economics
Course
ECON 105
Professor
Junjie Liu

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

tianjin and 38107 others unlocked
ECON 105 Full Course Notes
17
ECON 105 Full Course Notes
Verified Note
17 documents

Document Summary

Absolute advantage: the comparison among producers of a good according to their productivity: the producer that requires a smaller quantity of inputs to produce a good has the absolute advantage. When one person specializes in the product that they have the comparative advantage in, the total production of the economy rises: this increases the size of the economic pie! (ef ciency) Trade can bene t everyone in society, because it allows people to specialize in activities in which they have a comparative advantage! For both parties to bene t from the trade, the price at which they trade must be between the two opportunity costs. Imports - goods and services produced abroad and sold domestically. Exports - goods and services produced domestically and sold abroad. Some forms of comparative advantage are natural: eg. natural talent, canada"s abundance of natural resources. Hard work, training, education and experience can create or enhance comparative advantage.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

ECON 105 Lecture Notes - Lecture 4: Absolute Advantage, Comparative Advantage, Opportunity Cost
ultramarinetortoise293
ECON 105
Final Exam
Study Guide
ECON 105 Study Guide - Final Guide: Diminishing Returns, Byrsonima Crassifolia, Comparative Advantage
pinkbeaver981
ECON 105
Final Exam
Study Guide
ECON 105 Midterm: Midterm Study Guide.docx
sangriatoad117

Related Questions

If a country has a comparative advantage in the production of a good:
 
a. it can produce that good at a lower opportunity cost.
 
b. it will not find trade beneficial because other countries won't have a comparative advantage in other goods.
 
c. it must also have an absolute advantage in the good.
If a country has a comparative advantage in the production of a good:
 
(i) it will not find trade beneficial because another country(ies) won't have a comparative advantage in other goods.
(ii) it must also have an absolute advantage in the good.
(iii) it can produce that good at a lower opportunity cost.

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