Comparative Advantage in International Trade
An economics worksheet for Grade 12 students focusing on understanding and applying the principles of comparative advantage in international trade scenarios.
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Comparative Advantage in International Trade
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Read each question carefully and provide your best answer based on your understanding of comparative advantage. Show all your work for calculations.
1. Which of the following best describes comparative advantage?
The ability to produce a good at a lower absolute cost than another producer.
The ability to produce a good at a lower opportunity cost than another producer.
The ability to produce more of all goods than another producer.
The ability to consume more of all goods than another producer.
2. According to the principle of comparative advantage, countries should specialize in producing goods for which they have a:
Higher absolute advantage.
Lower absolute advantage.
Higher opportunity cost.
Lower opportunity cost.
3. When a country specializes in producing goods for which it has a comparative advantage, it can engage in , leading to increased overall production and consumption.
4. The concept of comparative advantage was first articulated by .
5. Explain the difference between absolute advantage and comparative advantage. Provide a brief example to illustrate your explanation.
6. Consider two countries, Country A and Country B, that can produce two goods: wheat and cloth. The table below shows the output per worker per day for each country.
Country
Wheat (bushels)
Cloth (yards)
Country A
10
20
Country B
8
12
a) Calculate the opportunity cost of producing one bushel of wheat in Country A.
b) Calculate the opportunity cost of producing one bushel of wheat in Country B.
c) Which country has a comparative advantage in producing wheat? Explain your reasoning.
7. A country can have an absolute advantage in producing all goods but still benefit from trade through comparative advantage.
True
False