Explain the difference between absolute advantage and comparative advantage
What will be an ideal response?
A person has an absolute advantage in the production of a good if he or she is more productive at producing the good. A person has a comparative advantage in the production of a good if he or she can produce it at the lowest opportunity cost.
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If price of product A increases by 10%, and the quantity demanded for product B drops by 50%, then these two products are
A) substitutes. B) complements. C) normal goods. D) inferior goods.
If the price level increases, then there will be
a. a movement upward along the AD curve b. a downward movement along the AD curve c. an AD curve shift to the right d. an AD curve shift to the left e. an AS curve shift to the right
The United States is a leading exporter of wheat. What explains the source of the comparative advantage of the United States in wheat production?
A) positive externalities B) investment by multinational firms such as Archer-Daniels-Midland and Tyson Foods Inc. C) climate and soil conditions in the United States which are well-suited for wheat production D) a large supply of unskilled labor
If the exports are $1.5 trillion, imports are $2 trillion, short-term investment to and from the U.S. exactly balances, and taxes and private payments to and from the U.S. also exactly balance, the capital account balance is a
A. deficit of $3.5 trillion. B. surplus of $3.5 trillion. C. surplus of $.5 trillion. D. deficit of $.5 trillion.