International Trade Concepts

Questions and Answers

What is absolute advantage?

The ability to produce a good or service at a lower opportunity cost than another country

Requiring or relying on something

The ability to produce a good or service more efficiently than another country can produce the same good or service (correct)

The act of limiting the kinds of goods and services produced

What is comparative advantage?

The ability to produce a good or service at a lower opportunity cost than another country (correct)

Requiring or relying on something

The ability to produce a good or service more efficiently than another country

The act of limiting the kinds of goods and services produced

What does it mean to be dependent?

Requiring or relying on something

What is specialization?

The act of limiting the kinds of goods and services produced Signup and view all the answers

A country with an absolute advantage can produce a good or service more efficiently than another country.

True Signup and view all the answers

Which internationally traded product is the Middle East best associated with?

Oil Signup and view all the answers

Which region specializes in diamonds?

Sub-Saharan Africa Signup and view all the answers

Provide an example of a country that is dependent on other countries.

A country that has little fertile soil Signup and view all the answers

What is it called when a company in Maine sends lobsters to France?

Exporting Signup and view all the answers

What does it mean when the United States is said to have an absolute advantage in producing food compared with Japan?

It produces food more efficiently than Japan Signup and view all the answers

Why would a country want to establish absolute advantage?

To produce goods more efficiently than other countries Signup and view all the answers

What is the best example of opportunity cost?

A country that chooses to export bananas but not wheat Signup and view all the answers

Why does the US import oil?

Because it does not produce enough oil Signup and view all the answers

Give an example of a country that is overly dependent on another country for critical goods and services.

A country that imports all its oil Signup and view all the answers

Study Notes

International Trade Concepts

Absolute Advantage: Ability to produce goods or services more efficiently than another country.
Comparative Advantage: Ability to produce goods or services at a lower opportunity cost compared to another country.

Trade Dependencies

Dependent: Relying on external resources or goods for economic stability.
Example of dependency: A country with little fertile soil relies heavily on imports for food.

Specialization and Production

Specialization: Focusing on producing limited types of goods or services to enhance efficiency.
A country with absolute advantage can produce goods more efficiently, enhancing its export potential.

Key International Trade Products

Middle East: Primarily associated with oil production and trade.
Sub-Saharan Africa: Known for specializing in diamonds.

Import and Export Dynamics

Exporting: Sending products abroad; Maine lobsters sent to France as an example.
The U.S. imports oil due to insufficient domestic production capacity.

Opportunity Cost in Trade

Opportunity Cost: The cost of forgoing the next best alternative; choosing to export bananas instead of wheat illustrates this concept.
A country overly dependent on imports, like one that imports all its oil, highlights risks in trade relationships.

Efficiency and Economic Strategy

Countries strive for absolute advantage to maximize production efficiency and competitiveness in global markets.

Description

Explore the fundamental concepts of international trade, including absolute and comparative advantage. Understand trade dependencies and the significance of specialization in production. This quiz also addresses key products associated with different regions and dynamics of importing and exporting.