MRU2.4: Another Look at Comparative Advantage

Trade is able to turn: - absolute advantage into comparative advantage. - diversity into strength. - costs into benefits. - diversity into isolation.

A: diversity into strength.

In the Mexico/U.S. example from the video, why was it better to have shirts produced in Mexico? - Because producing a shirt in Mexico requires giving up fewer computers than in the U.S. - Because producing a shirt in Mexico requires giving up more computers than in the U.S. - Because it takes fewer units of labor to produce a computer in the U.S. than in Mexico. - Because it takes fewer units of labor to produce a shirt in Mexico than in the U.S.

A: Because producing a shirt in Mexico requires giving up fewer computers than in the U.S.

What does it mean for Martha Stewart to have a comparative advantage in running Martha Stewart Living Omnimedia (MSO)? - Martha Stewart can run MSO at a lower opportunity cost than anyone else. - Martha Stewart is better at running MSO than anyone else. - Martha Stewart must also have the comparative advantage in other activities, such as ironing. - Martha Stewart gives up more of some other output when she runs MSO than does anyone else.

A: Martha Stewart can run MSO at a lower opportunity cost than anyone else.

Martha Stewart has an absolute advantage in ironing shirts. What does this mean? - Martha Stewart gives up more of some other output when she irons shirts than does anyone else. - Martha Stewart has the absolute disadvantage in other activities, such as running her business. - Martha Stewart is better at ironing shirts than anyone else. - Martha Stewart irons shirts at a lower opportunity cost than anyone else.

A: Martha Stewart is better at ironing shirts than anyone else.

Why doesn't Martha Stewart do all of her own ironing? - She has a comparative advantage in ironing. - She has an absolute advantage in ironing. - She has a comparative advantage in running her business. - She has an absolute advantage in running her business.

A: She has a comparative advantage in running her business.

Which of the following is true about trade? - Trade will make all individuals better off while possibly leaving aggregate wealth unchanged. - Trade will increase aggregate wealth while possibly making some individuals worse off. - Trade will decrease aggregate wealth while possibly making some individuals better off. - Trade will make all individuals worse off while possibly increasing aggregate wealth.

A: Trade will increase aggregate wealth while possibly making some individuals worse off.

What does the theory of comparative advantage help to explain? - Whether people should trade and who should trade with whom - Which goods should be traded and the terms of trade - Why people trade and where people trade - Why people trade and which goods they should trade

A: Why people trade and which goods they should trade

In the Mexico/U.S. example from the video, the opportunity cost of producing computers is measured in: - dollars. - shirts. - computers. - units of labor.

A: shirts.

The theory of comparative advantage says you should specialize in producing what you can produce at: - the greatest absolute cost. - the lowest absolute cost. - the lowest opportunity cost. - the greatest opportunity cost.

A: the lowest opportunity cost.

Trade based on absolute advantage: - would not occur in a case where one party can outproduce the other in all goods. - only occurs in cases where one party cannot outproduce the other in any goods. - can occur in any circumstance, regardless of the relative productivity of the two parties. - only occurs in cases where one party can outproduce the other in all goods.

A: would not occur in a case where one party can outproduce the other in all goods.