"Everybody has a comparative advantage in something." Do you agree or disagree? Why?
What will be an ideal response?
Agree. Since comparative advantage is based on relative abilities, everyone has a comparative advantage in something. If A is better at B at everything, but A is 50 percent better than B in activity X while only 20 percent better than B in activity Y, B has a comparative advantage in Y because B must give up less X to produce another Y than A. The relativity of the concept implies that everyone has a comparative advantage in something.
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Trade between two nations:
A) results in the maximization of total production. B) reduces global production. C) leads to a maximization of production in one nation and minimization of production in the other. D) is inefficient compared to when both do not indulge in international trade.
As a result of losing his job, Uncle Roy dropped his cable TV service and instead bought a new iPod. For Uncle Roy,
A) cable is an inferior good and the iPod is a normal good. B) cable is a normal good and the iPod is an inferior good. C) both cable and the iPod are normal goods. D) both cable and the iPod are inferior goods. E) cable and the iPod are complementary goods.