Problem : Why should countries trade?If a country can produce a good for less than another country can, then the opportunity for advantageous trade exists and both countries could benefit.
Problem : Explain absolute advantage.An absolute advantage occurs when one producer uses a smaller amount of inputs to produce a given amount of outputs than another producer.
Problem : Explain comparative advantage.A comparative advantage occurs when a producer has a lower opportunity cost of production than other producers.
Problem : Who should produce goods when using trade advantages as criteria?The producer with the absolute advantage or the producer with the comparative advantage should always produce.
Problem : What is an opportunity cost?An opportunity cost is a way of describing what is given up when one choice is taken over another.