Circular-Flow Diagram Quiz

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Questions and Answers

What is absolute advantage?

Absolute advantage refers to the uncontested superiority of a country or business to produce a particular good better.

What is comparative advantage?

Comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production diversification.

How do absolute advantage and comparative advantage influence resource allocation?

They largely influence how and why nations and businesses devote resources to the production of particular goods.

Define absolute advantage in your own words.

Absolute advantage is when a country or business is better at producing a specific good compared to others, without any competition. Signup and view all the answers

Explain the concept of comparative advantage.

Comparative advantage is the idea that a country or business should focus on producing goods or services that have a lower opportunity cost compared to others. Signup and view all the answers

How does absolute advantage impact production?

Absolute advantage allows a country or business to produce a specific good more efficiently and at a lower cost compared to others. Signup and view all the answers

What factors are considered in comparative advantage?

Comparative advantage takes into account the opportunity cost of producing different goods or services. Signup and view all the answers

Why is resource allocation influenced by absolute advantage and comparative advantage?

Absolute advantage and comparative advantage help determine how resources should be allocated to maximize efficiency and productivity. Signup and view all the answers

Give an example of absolute advantage.

An example of absolute advantage is when a country can produce cars more efficiently and at a lower cost compared to other countries. Signup and view all the answers

How does comparative advantage impact decision making in production diversification?

Comparative advantage helps in choosing which goods or services to produce, based on their lower opportunity cost compared to others. Signup and view all the answers

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