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Sources of Comparative Advantage quiz

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  • What is comparative advantage?
    Comparative advantage is the ability to produce a good at a lower opportunity cost than another producer.
  • How does climate influence comparative advantage?
    Climate affects comparative advantage by making certain regions more suitable for producing specific goods, such as bananas in Costa Rica or strawberries in the UK.
  • Why does Kansas have a comparative advantage in wheat production?
    Kansas has the right weather and soil quality, making it ideal for growing wheat compared to other regions.
  • How do natural resources contribute to comparative advantage?
    Countries with abundant natural resources can produce certain goods more efficiently, giving them a comparative advantage in those products.
  • What role does technology play in comparative advantage?
    Advanced technology allows countries to produce high-tech goods more efficiently, as seen with Japan's advantage in car manufacturing.
  • How does an abundance of labor or capital affect comparative advantage?
    Having a large, skilled workforce or specialized capital helps countries produce certain goods more cheaply, leading to comparative advantage.
  • Why does Bangladesh have a comparative advantage in clothing production?
    Bangladesh has a large population with experience in textiles, making it efficient at producing clothing.
  • What are external economies in the context of comparative advantage?
    External economies refer to the cost advantages businesses gain by being located near other industry members, such as Hollywood for movies.
  • How do external economies differ from an abundance of labor?
    External economies focus on the benefits of industry clustering in a location, while abundance of labor is about having many skilled workers.
  • Why does Hollywood have a comparative advantage in movie production?
    Hollywood's concentration of directors, actors, and production resources lowers costs and increases efficiency for movie studios.
  • How do land-intensive goods influence comparative advantage?
    Countries with abundant land have a comparative advantage in producing land-intensive goods.
  • What is the significance of capital-intensive goods in comparative advantage?
    Countries with lots of machinery and capital are better suited to produce capital-intensive goods efficiently.
  • How can identifying a good’s resource needs help determine comparative advantage?
    By knowing what resources a good requires, we can predict which countries are likely to produce it most efficiently.
  • What is the relationship between opportunity cost and comparative advantage?
    A country has a comparative advantage in producing goods for which it has the lowest opportunity cost compared to others.
  • How do specialized labor characteristics impact comparative advantage?
    Countries with specialized or skilled labor can efficiently produce certain goods, giving them a comparative advantage in those industries.