Principle of Comparative Cost Advantage And Its Limitations - SS3 Economics Past Questions & Answers - page 1

1

What is the principle of comparative cost advantage?

A

The idea that countries should specialize in producing goods they are good at producing

B

The idea that countries should produce everything they need domestically

 

C

The idea that countries should produce only what they are efficient at producing

D

The idea that countries should import all goods they need

CORRECT OPTION: c
2

What is one of the benefits of the principle of comparative cost advantage?

A

It enables countries to access a wider variety of goods and services

B

It encourages countries to produce everything they need domestically

C

It leads to decreased productivity and economic growth

 

D

It promotes unequal distribution of gains between countries

CORRECT OPTION: a
3

What does the principle of comparative cost advantage assume about resources within a country?

A

That resources are freely mobile between different sectors

B

That resources are scarce and should be preserved

C

That resources can only be used for one sector of production

 

D

That resources are abundant and can be used for any sector of production

CORRECT OPTION: a
4

What can differences in technology and infrastructure between countries affect?

A

 The viability of comparative cost advantage

B

The uniformity of production costs across countries

C

The equal distribution of gains between countries

 

D

The need for trade restrictions between countries

CORRECT OPTION: a
5

What can comparative cost advantage lead to in terms of gains between countries?

A

Unequal distribution of gains

B

Equal distribution of gains

C

Increased political tensions and trade disputes

 

D

Decreased productivity and economic growth

CORRECT OPTION: a
6

What is the main idea behind the principle of comparative cost advantage?

The main idea is that countries should specialize in producing goods and services that they can produce relatively more efficiently than other countries.

 

7

What are some limitations of the principle of comparative cost advantage?

 

Some limitations include the assumption of freely mobile resources, differences in technology and infrastructure, and unequal distribution of gains between countries.

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