Tool of economic #1 he law of comparative advantage says that A. whoever has an
ID: 1207546 • Letter: T
Question
Tool of economic
#1 he 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 the 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 work force
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
Explanation / Answer
(1) The correct answer is option (C). The law of comparative advantage says the individual with the lowest opportunity cost of producing a particular good should produce it.
(2) The correct answer is option (B). A country has an absolute advantage in the production of a good if that country has the lowest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources.
(3) The correct answer is option (D). A production possibilities frontier can shift outward for all of the following reasons except an improvement in technology.