Comparative Advantage and Specialization

Which of these factors affect the level of trade between countries?

• each country's capacity to produce goods

• the exchange rate between the countries' currencies

• political climate

• all of the above

An advantage gained when a person, company, or country can produce a particular good or service at a lower opportunity cost than another producer is called...

• comparative advantage

• absolute advantage

• trade off

• competition

The cost of the next best alternative that is given up when a different alternative is chosen is called...

• specialization

• marginal cost

• opportunity cost

• comparative advantage

The U.S. can produce 30 apples and 15 oranges. Canada can produce 10 apples and 12 oranges. Who has the absolute advantage in apples?

• U.S.

• Canada

• Neither country has the absolute advantage in apples.

• Both countries have an absolute advantage in apples.

The rate at which goods are exchanged for one another in the international market is called...

• foreign exchange market

• terms of trade

• inflation rate

• interest rate