PPF - Comparative Advantage and Trade quiz #1 Flashcards
PPF - Comparative Advantage and Trade quiz #1
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Which situation is an example of comparative advantage in an international market? A country specializes in producing a good for which it has a lower opportunity cost compared to other countries, such as Brazil exporting coffee while the U.S. exports wheat. Which country has the comparative advantage in the production of wheat? The country with the lowest opportunity cost for producing wheat has the comparative advantage in wheat production. What two situations are consistent with Ricardo's theory of comparative advantage? 1) Each country specializes in the good for which it has a lower opportunity cost. 2) Both countries benefit from trade by consuming beyond their individual production possibilities. What is India's comparative advantage in global competition? India's comparative advantage is in goods or services that it can produce at a lower opportunity cost than other countries, such as information technology and software services. Which of the following statements are true about the economic basis of trade? Trade is based on comparative advantage, allowing countries to specialize and consume beyond their own production possibilities. Which of these is a factor that can limit the benefits of trade? Trade barriers, such as tariffs and quotas, can limit the benefits of trade by restricting specialization and exchange. How can a nation use opportunity cost to achieve trade benefits? By specializing in goods with the lowest opportunity cost and trading for others, a nation can consume more than it could produce alone. The idea behind comparative advantage reflects the possibility that one party: Can produce a good at a lower opportunity cost than another party, leading to mutual gains from trade. How is comparative advantage applied in AP Human Geography? Comparative advantage explains how regions or countries specialize in producing goods for which they have the lowest opportunity cost, influencing global trade patterns. One of the great benefits of trade is: Trade allows both parties to consume beyond their individual production possibilities frontiers. If American farmers sell part of their corn production to Mexican consumers, their sale represents: An example of international trade based on comparative advantage, where each country specializes and exchanges goods. The theory of comparative advantage exists because: Different parties have different opportunity costs for producing goods, making specialization and trade beneficial. The idea behind comparative advantage reflects the possibility that one party can: Specialize in producing a good at a lower opportunity cost and trade for other goods, increasing overall welfare. Gains from trade can be measured by: The ability of both parties to consume combinations of goods beyond their own production possibilities frontiers after trade.