In economics, what does the term trade most often describe? - Purchases between countries.
Define export. - Goods and services that producers create within a country and then sell and send to
people, companies, or governments in other countries
Define import. - Goods and services that producers in other countries make and then people,
companies, and governments purchase and bring into a different country
How is trade a voluntary exchange? - It involves decisions that people make freely and that no one
forces onto someone else.
When does a person practice specialization? - When he or she concentrates on one kind of work and
uses the profits from that work to buy the other things he or she needs
What do people who go against the tide of specialization by trying to be self-sustaining do? - Produce as
many goods and services themselves as they can
When does comparative advantage exist? - When one producer has a smaller opportunity cost of
producing a good or service compared to another producer
When does absolute advantage exist? - When one person or country can produce goods with a smaller
input of resources than another
From your knowledge of climate and geography, explain why Canada has an absolute advantage over
Honduras in making maple syrup and Honduras has an absolute advantage over Canada in growing
bananas. - Maple trees need a cooler climate and bananas need a warmer one.
What is the difference between comparative advantage and absolute advantage? - Comparative
advantage compares what producers give up to produce something, while absolute advantage compares
what producers use to produce something.
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