1.3 Absolute and Comparative Advantage

Based on the information provided above, which of the following must be true?

• Home Nation has an absolute advantage in the production of computers.

• Foreign Nation has an absolute advantage in the production of autos.

• Home Nation has a comparative advantage in the production of autos.

• Foreign Nation has a comparative advantage in the production of computers.

• Neither nation has a comparative advantage.

Based on the information in the table above, which of the following is true?

• Peru has a comparative advantage in producing wheat.

• Peru has an absolute advantage in producing wheat.

• Brazil has an absolute advantage in producing wheat.

• Peru has a comparative advantage in producing coffee.

• Brazil has a comparative advantage in producing coffee.

The graph above shows the production possibilities curve for Factory X and Factory Y. If Factory X uses the same amount of resources to produce skateboards and bikes as Factory Y uses, which of the following is true?

• Factory X has an absolute advantage in producing bikes.

• Factory X has an absolute advantage in producing skateboards.

• Factory X has a comparative advantage in producing skateboards.

• Factory Y has a comparative advantage in producing skateboards.

• Factory Y has an absolute advantage in producing skateboards.

Based on the data in the table, which of the following is true?

• Country X has a comparative advantage in producing cars.

• Country Y has a comparative advantage in producing cars.

• Country X has an absolute advantage in producing cars.

• Country X has an absolute advantage in producing motorcycles.

• Country Y has a comparative advantage in producing motorcycles.

Country A can produce either 2 tons of cocoa or 4 cars with 10 units of labor. Country B can produce either 5 tons of cocoa or 25 cars with 10 units of labor. Based on this information, which of the following is true?

• Country A has an absolute advantage in the production of cocoa, while Country B has a comparative advantage in the production of cocoa.

• Country A has a comparative advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars.

• Country A has an absolute advantage in the production of cocoa, while Country B has a comparative advantage in the production of cars.

• Country A has a comparative disadvantage in the production of both goods.

• Neither country has a comparative advantage in the production of either good.

The table provided shows the time required to produce one crane or one truck in the United States and Thailand. The United States and Thailand have the same amount of resources. Which of the following can be accurately concluded from the data?

• The United States has a comparative advantage in producing cranes, and Thailand has a comparative advantage in producing trucks.

• Thailand has a comparative advantage in producing cranes, and the United States has a comparative advantage in producing trucks.

• Thailand has a comparative advantage in producing both cranes and trucks.

• The United States has a comparative advantage in producing both cranes and trucks.

• Neither country has a comparative advantage in producing cranes and trucks.

The table above shows the quantity of motorcycles and automobiles produced by two countries that use the same amount of resources. Which of the following is true?

• Country Y has an absolute and comparative advantage in the production of motorcycles.

• Country Y has an absolute and comparative advantage in the production of automobiles.

• Neither country has a comparative advantage in the production of motorcycles.

• Country X has an absolute and comparative advantage in the production of both goods.

• Country X has an absolute and comparative advantage in the production of motorcycles.

The data above indicates labor-hours needed to produce a single unit of each of two commodities in each of two countries. If labor is the only factor used to produce the commodities, which of the following statements must be correct?

1. I. Country A has an absolute advantage in the production of both commodities, but a comparative advantage in the production of wheat.

2. II. Country B has an absolute advantage in the production of both commodities, but a comparative advantage in the production of fish.

3. III. Mutually advantageous trade can occur between the two countries when 2.5 units of fish are exchanged for 1 unit of wheat.

• I only

• II only

• III only

• I and III only

• II and III only

Given this information, which of the following statements is correct?

• X has a comparative advantage in the production of both food and clothing.

• Y has a comparative advantage in the production of both food and clothing.

• X has a comparative advantage in food production, whereas Y has a comparative advantage in clothing production.

• Y has a comparative advantage in food production, whereas X has a comparative advantage in clothing production.

• Neither country has a comparative advantage in the production of either good.

Sam and Bill run a leaf raking and lawn mowing business. In one day, Sam can rake 3 lawns or mow 5 lawns whereas Bill can rake 2 lawns or mow 6 lawns. Which of the following correctly describes Sam’s and Bill’s absolute and comparative advantages?

• Sam has a comparative advantage in raking and an absolute advantage in mowing.

• Sam has a comparative advantage in mowing and an absolute advantage in raking.

• Sam has a comparative advantage in mowing and an absolute advantage in mowing.

• Bill has a comparative advantage in raking and an absolute advantage in mowing.

• Bill has a comparative advantage in mowing and an absolute advantage in mowing.