Winthrop University
College of Business Administration
Principles of Microeconomics
ECON 215
Dr. Pantuosco
Sample Theory of Comparative Advantage Questions
Use the information below to answer questions 1 through 4
Pakistan’s production with one week of labor:
100 pairs of shoes, or 10 automobiles
Germany’s production with one week of labor:
120 pairs of shoes, or 20 automobiles
1. Based on the numbers provided above
a. Pakistan has an absolute advantage in the production of both goods
b. Germany has an absolute advantage in the production of both goods
c. Neither country has an absolute advantage in the production of both goods
2. According to the Theory of Comparative Advantage
a. Pakistan should produce shoes and Germany should produce automobiles
b. Pakistan should produce automobiles and Germany should produce shoes
c. Germany should not trade with Pakistan because of Pakistan’s political stance on terrorism
d. Pakistan should not trade with Germany because of Germany’s Nazi history
3. Pakistan would be willing to trade 100 pairs of shoes for 9 automobiles. True/false Explain
4. The Theory of Comparative Advantage benefits
a. Pakistan
b. Germany
c. neither country
d. both countries
5. The goal of the Theory of Comparative Advantage is
a. lower price for the consumers
b. lower profits for American businesses
c. more money for the US government d. to help other countries
6. Who is the Economist behind the Theory of Comparative Advantage?
7. What are the downfalls of trade?
8. What are some of the benefits of trade?
9. What is free trade?
10. What is a tariff?
If the Japanese produce and sell a computer for $110 and the Americans produce the same quality
computer for $180
11. Which computer should you buy?
12. If you buy the Japanese made computer then what will happen to the American producers?
What if the American computer company lobbied the government and convinced them to put a
$90 tariff on each Japanese computer
13. What would the new price of the Japanese computer be?
14. Would the US consumer like this deal?
15. Who would win from this tariff arrangement?
16. Who would lose?