Understanding Global Trade

Why might a strong country like the United States choose to import products such as computers and automobiles instead of producing all of them domestically?

• To reduce the variety of products available to consumers

• To solely focus on agricultural production

• To increase the unemployment rate domestically

• To utilize different natural, human, and capital resources efficiently

What does the term 'opportunity cost' refer to in the context of production?

• The cost of labor in manufacturing

• The financial expense of creating a new product

• The amount of another good or service that might otherwise have been produced

• The cost of marketing a product internationally

What does it mean if a country has an 'absolute advantage' in producing a good?

• It uses the most advanced technology to produce the good

• It is the only country that can produce the good

• It can produce more of the good with the same resources as another country

• It can produce the good at lower costs than any other country

Why is trade beneficial even if one country has an absolute advantage in producing all goods?

• Both countries can still benefit from lower opportunity costs

• It prevents any trade disputes between countries

• It increases the political power of the dominant country

• It allows for a monopoly on certain goods

What is a 'comparative advantage'?

• When a country's goods are preferred over another's due to branding

• When a country can produce goods at a higher quality than another country

• The advantage a country has in producing a product with the lower opportunity cost

• The ability to produce goods faster than other countries

How can world trade contribute to higher standards of living?

• By increasing prices of goods globally

• By reducing the variety of goods available

• By making use of the world's scarce resources more efficiently

• By limiting the development of new technologies

If Country A can produce 100 cars with 10 workers and Country B can produce 80 cars with the same number of workers, which country has an absolute advantage?

• Country B

• Country A

• Both countries

• Neither country

Joy gives 2 haircuts and 1 perm. Susie gives 3 haircuts and 2 perms. Who has the absolute advantage for haircuts?

• Joy

• Susie

What does absolute advantage refer to?

• A situation where a country has better technology than another country

• A situation where a country imports more than it exports

• A situation where a country can produce a good at a lower opportunity cost

• A situation where a country can produce a good with fewer resources than another country

- Form of trade Items purchased that come into a country

- Goods bought from sellers in other countries

• Import

• Export