One Region Is Said to Have an Absolute Advantage Over

question 5

Multiple Choice

One region is said to have an absolute advantage over another region in the production of good X when

• A)the first region has a more productive labour force than the second.
• B)the first region has a larger supply of the raw materials required to produce good X.
• C)an equal quantity of resources can produce more of good X in the first region than in the second region.
• D)there is no demand for good X in the second region.
• E)the opportunity cost of one unit of X is lower in the first region than in the second region.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing and able to buy.

Perfectly Elastic

A situation in economic theory where the quantity demanded or supplied responds infinitely to changes in price.

Perfectly Inelastic

A situation in which the demand for a good or service does not change in response to changes in price.

Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with higher elasticity indicating greater responsiveness.