The Theory of Comparative Advantage

question 8

Multiple Choice

The theory of comparative advantage:

• A) Claims that economic well-being is enhanced if each country's citizens produce only a single product
• B) Claims that economic well-being is enhanced when all countries compare commodity prices after adjusting for exchange rate differences in order to standardize the prices charged all countries
• C) Claims that economic well-being is enhanced if each country's citizens produce that which they have a comparative advantage in producing relative to the citizens of other countries, and then trade production
• D) Claims that no country has an absolute advantage over another country in the production of any good or service

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Definitions:

High Price

Refers to goods or services being sold at a rate above the average market value, often due to high demand, low supply, or premium quality.

Marginal Utility

Marginal utility represents the additional satisfaction or benefit a consumer gains from consuming one more unit of a good or service.

Total Utility

The overall satisfaction or value a consumer derives from consuming a certain quantity of goods or services.

Total Utility

Full contentment gained from the intake of a particular total volume of a good or service.