Comparative Advantage and Production Possibilities

The video tutorial explains the concept of comparative advantage using a simplified model with two countries, A and B, producing apples and bananas. It calculates the opportunity costs for each country and analyzes the lack of comparative advantage due to identical opportunity costs. The tutorial includes a graphical representation of production possibilities and concludes with real-world implications of trade scenarios.

What are the two countries capable of producing in the simplified world?

• Oranges and grapes

• Apples and oranges

• Bananas and grapes

• Apples and bananas

If Country A focuses all its resources on apples, how many can it produce in a day?

• Four apples

• Two apples

• Three apples

• Six apples

What is the opportunity cost of producing one apple in Country A?

• Two bananas

• Four bananas

• One banana

• Three bananas

How many bananas does Country B give up to produce one apple?

• Four bananas

• Two bananas

• One banana

• Three bananas

What conclusion is drawn about the comparative advantage between the two countries?

• Country A has a comparative advantage in apples

• Country B has a comparative advantage in bananas

• Neither country has a comparative advantage

• Both countries have a comparative advantage

What does the slope of the production possibility frontier represent?

• The trade balance

• The opportunity cost

• The total production

• The comparative advantage

What happens to bananas when Country A increases apple production by one unit?

• Bananas increase by one

• Bananas increase by two

• Bananas decrease by two

• Bananas remain the same

What is a key takeaway from the graphical representation of production possibilities?

• Same slopes indicate no gains from trade

• Different slopes indicate gains from trade

• Different slopes indicate no trade

• Same slopes indicate gains from trade

In what scenario might there be no gains from trade despite different opportunity costs?

• When countries refuse to trade

• When countries have different climates

• When countries have the same population

• When countries have the same resources

What is a classic scenario where there are no gains from trade?

• When one country has a monopoly

• When both countries have the same opportunity costs

• When both countries have different opportunity costs

• When both countries have different resources