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AP Macroeconomics 1.3 Comparative Advantage and Gains From Trade Questions

Compare producer costs and productivity, then use comparative advantage and exchange terms to explain specialization and gains from trade.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • compare output or input requirements to determine absolute advantage
  • calculate opportunity costs and identify comparative advantage from tables or PPCs
  • assign specialization, exports and imports according to comparative advantage
  • derive mutually beneficial terms of trade from both producers' opportunity costs
  • evaluate whether a stated exchange benefits both partners or favours domestic production

Covered syllabus points

MKT-1.A—a. Define absolute advantage and comparative advantage. b. Determine (using data from PPCs or tables as appropriate) absolute and…MKT-1.B—a. Explain (using data from PPCs or tables as appropriate) how specialization according to comparative advantage with appropriate…

Question 1

[Maximum number: 2]

Sweden and Norway use equal quantities of resources to produce food and capital goods. The table below shows the maximum possible production of food OR capital goods for each country.

Table for Question 1 — AP Macroeconomics

Question (a)

(a)

Which country has the comparative advantage in the production of capital goods? Explain.

[ 1 ]

Question (b)

(b)

Based on the table above, identify a specific number of units of capital goods that could be traded for 10 units of food and be mutually beneficial.

[ 1 ]
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