#1 Review:
- Absolute advantage is when a country can produce more of a good than others with the same resources. Example: Country A can produce 10 cars, while Country B can only produce 5.
- Comparative advantage is when a country produces goods at a lower opportunity cost. Even if Country A is better at producing everything, it should focus on the goods it’s most efficient at producing relative to others.
#2 Thinking Question:
- Use tariffs to protect domestic industries while still allowing imports and generating revenue.
- Use quotas when you need to strictly limit the quantity of imports, often for security or health reasons.
#3 Application Question:
In March 2020, as a neighboring country to China, you might impose:
- Health-based restrictions on goods like food.
- Sanitary measures on imports with inspections.
- Diversify suppliers to reduce dependency on China in case of supply disruptions