Question

Absolute advantage is based on opportunity cost:

A) True

B) False

In economics, specialization requires deep knowledge of several topics:

A) True

B) False

Improvements to the quality of land would push the production possibilities curve outward:

A) True

B) False

The law of supply states that price and quantity are inversely related:

A) True

B) False

Answer 1

1). A country enjoy absolute advantage in the production when they are more efficient than the other countries for producing a particular good or service. The geographical factors, weather, human capital etc..... can be favourable for the country to produce the particular good. The absolute advantage is not based on the opportunity cost, rather it would take the efficiency of country to produce particular goods and services.

Ans: FALSE.

2. Normally, countries specialize in the production of goods and services they are good at. So the factors of production of the economy are utilized in an efficient matter, the specialization does not require deep knowledge of different topics.

Ans: FALSE.

3. The production possibility frontier shows the maximum possible combinations of two goods that can be produced with given level of resources and technology. A country produces the goods and services with the factors of production that are land , labour, capital and entreprenuership , any improvements in these factors would make the country more efiicient and this is shown by a outward shif of the PPF.

Ans: TRUE.

4. The law of supply states that the price and the quantity supplied are positively related , that is an increase in the price increases the quantity supplied and vice versa.

Ans: FALSE.