AP Microeconomics: Absolute and Comparative Advantage Practice Quiz

📚 Topic Summary

Absolute advantage refers to the ability to produce more of a good or service than another producer, using the same amount of resources. Comparative advantage, on the other hand, focuses on opportunity cost; it's the ability to produce a good or service at a lower opportunity cost than another producer. Understanding these concepts is crucial for grasping the principles of trade and specialization in economics.

🔤 Part A: Vocabulary

Match the terms with their definitions:

1. Absolute Advantage
2. Comparative Advantage
3. Opportunity Cost
4. Production Possibilities Frontier (PPF)
5. Specialization

Definitions:

1. The cost of the next best alternative forgone.
2. Producing more of a good or service than another producer, using the same amount of resources.
3. Producing a good or service at a lower opportunity cost than another producer.
4. A curve illustrating the varying amounts of two products that can be produced when both depend on the same finite resources.
5. Focusing productive effort on a limited range of activities.

Match each term to the correct definition.

✍️ Part B: Fill in the Blanks

Complete the following paragraph with the correct terms related to absolute and comparative advantage:

When a country can produce more of a good than another country using the same resources, it has a(n) __________ __________ in that good. However, trade decisions are often based on __________ __________, which considers the __________ __________ of production. The __________ __________ __________ illustrates the trade-offs between producing two goods and helps determine potential gains from __________.

🤔 Part C: Critical Thinking

Imagine two countries, A and B. Country A can produce either 100 units of wheat or 50 units of cloth with its resources. Country B can produce either 60 units of wheat or 60 units of cloth. Which country has the comparative advantage in producing wheat, and why?