Comparative Advantage - AP Microeconomics

1. What is the basis of a country's specialization?

   Comparative advantage. Countries focus on goods with lowest opportunity costs.

2. What dictates the allocation of resources in international trade?

   Comparative advantage. Opportunity costs guide efficient resource distribution.

3. Find the opportunity cost of 1 pair of shoes if 3 hats are lost.

   $\frac{3}{1} = 3$ hats. Standard opportunity cost calculation.

4. Which advantage results from using fewer resources?

   Absolute advantage. Based on production capacity, not opportunity cost.

5. What is the impact of comparative advantage on global production?

   Increases total output. Specialization based on efficiency creates more goods overall.

6. State the principle that explains trade benefits.

   Comparative advantage. Core economic principle explaining trade benefits.

7. Find the opportunity cost of producing 1 unit of good X if 2 units of good Y are sacrificed.

   $\frac{2}{1} = 2$ units of Y. Direct calculation using the opportunity cost formula.

8. What is the formula for opportunity cost in terms of good A?

   $\text{Opportunity Cost of A} = \frac{\text{Loss in B}}{\text{Gain in A}}$. Standard formula showing trade-offs in production.

9. What is the definition of comparative advantage?

   Ability to produce a good at a lower opportunity cost. This is the fundamental definition in trade theory.

10. Is it possible for a country to have comparative advantage in all goods?

    No. A country must sacrifice something to gain comparative advantage.

11. Calculate the opportunity cost of 1 car if 3 computers are forgone.

    $\frac{3}{1} = 3$ computers. Simple opportunity cost calculation showing trade-offs.

12. Calculate opportunity cost of 1 phone if 2 tablets are forgone.

    $\frac{2}{1} = 2$ tablets. Direct opportunity cost calculation.

13. What is the result of countries specializing according to comparative advantage?

    Increased overall production and trade benefits. Specialization leads to efficiency gains and mutual benefits.

14. What determines the pattern of trade between countries?

    Comparative advantage. Opportunity cost differences determine who trades what.

15. What is the opportunity cost if no goods are sacrificed for production?

    Zero. No sacrifice means no alternative use of resources.

16. Identify the factor: Determines specialization in a good.

    Comparative advantage. Lower opportunity cost determines production choice.

17. Which advantage is less relevant in determining trade patterns?

    Absolute advantage. Trade patterns depend on opportunity costs, not output.

18. What concept leads to mutually beneficial trade?

    Comparative advantage. Both countries benefit when each specializes efficiently.

19. What happens to opportunity cost if production requires more resources?

    Opportunity cost increases. More resources needed means higher sacrifice for production.

20. What is the effect of comparative advantage on trade prices?

    Determines relative trade prices. Opportunity costs determine exchange rates between goods.

21. Which principle supports the idea of free trade?

    Comparative advantage. Efficiency gains from specialization support trade benefits.

22. Identify the condition: A country produces a good at a lower opportunity cost.

    Comparative advantage. Lower opportunity cost defines comparative advantage.

23. Calculate opportunity cost of 1 unit of X if 6 units of Y are forgone.

    $\frac{6}{1} = 6$ units of Y. Basic opportunity cost calculation.

24. What increases when countries trade based on comparative advantage?

    Total welfare and efficiency. Specialization improves global resource allocation.

25. What is the significance of opportunity cost in trade?

    It determines comparative advantage. Opportunity cost determines who should produce what.

26. Identify the term: Producing more of a good than others.

    Absolute advantage. Measures production capacity, not opportunity cost efficiency.

27. Identify the key factor in deciding which goods to export.

    Comparative advantage. Countries export goods with lowest opportunity costs.

28. What should a country specialize in according to comparative advantage?

    Goods with lower opportunity costs. Specialization maximizes efficiency and trade gains.

29. What is the main driver of international trade?

    Comparative advantage. Opportunity cost differences drive international exchange.

30. Which advantage is related to production efficiency?

    Absolute advantage. Measures how much can be produced with given resources.

31. What must be lower for a country to have comparative advantage?

    Opportunity cost. Comparative advantage requires lower sacrifice than competitors.

32. Find the opportunity cost of 1 widget if 5 gadgets are sacrificed.

    $\frac{5}{1} = 5$ gadgets. Straightforward opportunity cost calculation.

33. Which advantage is based on lower opportunity costs?

    Comparative advantage. Focuses on efficiency of resource allocation, not quantity.

34. Which concept determines specialization in trade?

    Comparative advantage. Countries specialize where they have lowest opportunity cost.

35. Calculate opportunity cost of 1 laptop if 4 desktops are lost.

    $\frac{4}{1} = 4$ desktops. Basic opportunity cost calculation.

36. Calculate opportunity cost of 1 unit of A if 4 units of B are lost.

    $\frac{4}{1} = 4$ units of B. Basic opportunity cost calculation showing resource trade-offs.

37. Identify the advantage: Producing more with same resources.

    Absolute advantage. Measures productive capacity with same input resources.

38. What is the relationship between opportunity cost and comparative advantage?

    Lower opportunity cost leads to comparative advantage. Inverse relationship: lower cost creates advantage.

39. What is the difference between absolute and comparative advantage?

    Absolute: more output; Comparative: lower opportunity cost. Key distinction: output quantity vs. opportunity cost efficiency.

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