Comparative and Absolute Advantage Quick Check

At most, a country could produce 20,000 units of Good A or 5,000 units of Good B. What is the opportunity cost of producing one unit of Good B in terms Good A?

4 units of Good A

What distinguishes comparative advantage from absolute advantage in production?

A country has comparative advantage in production when its opportunity costs of producing a good are lower than another country's.

Apples Bananas Country A 500 1500 Country B 800 1600 The table above displays the amount Country A and Country B could produce if they focused all their resources and attention on producing either apples or bananas. They wish to enter into a trade agreement, and they are discussing on which country should focus on producing which fruit. Using the table above, which country should produce bananas and why? Remember to take absolute and comparative advantage into account when making this decision.

Country A since it has the comparative advantage in banana production.

If both Japan and the United States directed all of their resources to the production of laptops, the United States would produce a greater quantity laptops in any period of time. Given this information, which of the following is necessarily true?

The United States has an absolute advantage in laptop production.

A country produces books and video games exclusively. In the same time it takes to produce one video game, the country could produce 4 books. If the country only focused on one of the goods to produce, the maximum amount the country can produce is either 200 video games or 800 books. They can create a combination of the two goods, but the opportunity cost for production will remain the same. If the country would like to consume a combination of 100 video games and 1,400 books, which of the following is true?

The country might consume 100 video games and 1,400 books following trade.