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Exam skills

Exam skills. 1. How to identify comparative advantage. Example 1. a. State which country has an absolute advantage in producing clothes. (1 mark). b. Explain which country has a comparative advantage in producing food. (3 marks).

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Exam skills

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  1. Exam skills 1 How to identify comparative advantage

  2. Example 1 a. State which country has an absolute advantage in producing clothes. (1 mark) b. Explain which country has a comparative advantage in producing food. (3 marks) c. Suppose the transaction cost for each unit of food traded is 0.5 units of clothes. Is mutually beneficial trade possible between these two countries? Explain. (3 marks) The following shows the amount of output that can be produced with each unit of resources.

  3. 1. Study the questions carefully The table shows the amount of output that can be produced, but not the resource requirement. Pay attention to the wording (e.g., OR vs AND). The following shows the amount of output that can be produced with each unit of resources.

  4. 1. Study the questions carefully State: No explanation is needed Explain: Explanation is needed Don’t confuse the concepts of absolute advantage and comparative advantage a. State which country has an absolute advantage in producing clothes. (1 mark) b. Explain which country has a comparative advantage in producing food. (3 marks) c. Suppose the transaction cost for each unit of food traded is 0.5 units of clothes. Is mutually beneficial trade possible between these two countries? Explain. (3 marks) You should check the marks the question carries.

  5. 2. How to tackle the questions? • 1 choice • 1 choice + 1 reason • 1 choice + 1 reason State: No explanation is needed Explain: Explanation is needed a. State which country has an absolute advantage in producing clothes. (1 mark) b. Explain which country has a comparative advantage in producing food. (3 marks) c. Suppose the transaction cost for each unit of food traded is 0.5 units of clothes. Is mutually beneficial trade possible between these two countries? Explain. (3 marks) 1 mark for each choice (answering the country or yes/no) and 2 marks for each reason

  6. 2. How to tackle the questions? • 1 choice State: No explanation is needed Just tell which country has an absolute advantage;NO elaboration is needed. Both countries produce with the same amount of resources (i.e., 1 unit of resources). In this case, the one which has a greater amount of output will have an absolute advantage in producing the good. a. State which country has an absolute advantage in producing clothes. (1 mark) The following shows the amount of output that can be produced with each unit of resources.

  7. 2. How to tackle the questions? • 1 choice State: No explanation is needed Just tell which country has an absolute advantage;NO elaboration is needed. Thus, Country Y has an absolute advantage in producing clothes. a. State which country has an absolute advantage in producing clothes. (1 mark) Answer: Country Y (1 mark) The following shows the amount of output that can be produced with each unit of resources.

  8. 2. How to tackle the questions? Explain: explanation needed • 1 choice + 1 reason b. Explain which country has a comparative advantage in producing food. (3 marks)  Which country has a comparative advantage? (1 mark)  Reason: Has a lower opportunity cost (2 marks) 3 marks

  9. 2. How to tackle the questions? Explain: explanation needed • 1 choice + 1 reason b. Explain which country has a comparative advantage in producing food. (3 marks) Answer:  Country X, (1 mark)  because Country X’s opportunity cost of producing food (2/3 units of clothes) is lower than that of Country Y (7/5 units of clothes). (2 marks) 3 marks If you are familiar with fractions, you may just use fractions in your answer.

  10. 2. How to tackle the questions? Explain: explanation needed • 1 choice + 1 reason b. Explain which country has a comparative advantage in producing food. (3 marks) Answer:  Country X, (1 mark)  because Country X’s opportunity cost of producing food (2/3 units of clothes) is lower than that of Country Y (7/5 units of clothes). (2 marks) 3 marks 0.67 If not, converting fractions into decimals can be helpful. 1.4

  11. 2. How to tackle the questions? Explain: explanation needed • 1 choice + 1 reason Yes or no? (1 mark) Reason: Whether the potential gain is greater than the transaction cost (2 marks) 3 marks Merely answering ‘Yes’ or ‘No’ without explanation: 0 marks c. Suppose the transaction cost for each unit of food traded is 0.5 units of clothes. Is mutually beneficial trade possible between these two countries? Explain. (3 marks)

  12. 2. How to tackle the questions? Explain: explanation needed • 1 choice + 1 reason Yes, (1 mark) because the potential gain from trading 1 unit of food (0.73 units of clothes) is greater than the transaction cost (0.5 units of clothes). (2 marks) 3 marks = 1.4 – 0.67 Make use of previous answers. Don’t repeat the same calculation. c. Suppose the transaction cost for each unit of food traded is 0.5 units of clothes. Is mutually beneficial trade possible between these two countries? Explain. (3 marks) Study the questions carefully. Any information can be useful.

  13. 3. Remark: Answer efficiently It takes time to write.  It takes energy to write. You have to write for 135 minutes. Tired  Less efficient for the remaining questions Answer JUST what is required with the FEWEST words. Why?

  14. 3. Remark: Answer efficiently Write as few words as possible  No missed marks • Check the marks the question carries Don’t miss mark-carrying points  Present your points clearly Targets

  15. 3. Remark: Answer efficiently If you can get the same marks, which one would you choose? a. State which country has an absolute advantage in producing clothes. (1 mark) Country Y has an absolute advantage in producing clothes. Absolute advantage in producing clothes means higher productivity in producing clothes. According to the data given, Country Y can produce 7 units of clothes for each unit of resources while Country X can only produce 2 units of clothes with the same amount of resources. Therefore, Country Y has higher productivity in producing clothes. Country Y.

  16. 3. Remark: Answer efficiently If you can get the same marks, which one would you choose? b. Explain which country has a comparative advantage in producing food. (3 marks) A country has a comparative advantage in producing a good as it has a lower opportunity cost in producing the good. In this case, Country X’s opportunity cost of producing 1 unit of food is 0.67 units of clothes and Country Y’s opportunity cost of producing 1 unit of food is 1.4 units of clothes. By comparing the opportunity costs of both countries, we can conclude that Country X has a comparative advantage in producing food. Country X, because Country X’s opportunity cost of producing food (0.67 units of clothes) is smaller than that for Country Y (1.4 units of clothes).

  17. 3. Remark: Answer efficiently If you can get the same marks, which one would you choose? c. Suppose the transaction cost for each unit of food traded is 0.5 units of clothes. Is mutually beneficial trade possible between these two countries? Explain. (3 marks) Yes, mutually beneficial trade between Country X and Country Y is possible. The potential gain from trading 1 unit of food is equal to 0.73 units of clothes while the transaction cost for each unit of food traded is 0.5 units of clothes. This means that the net gain from trading 1 unit of food is greater than zero. Therefore, mutually beneficial trade is possible. Yes, because the potential gain from trading 1 unit of food (= 0.73 units of clothes) is greater than the transaction cost (0.5 units of clothes).

  18. 3. Remark: Answer efficiently  Use simple sentences.  However, you should make sure that the points are presented clearly and completely. For example: Country X’s cost is 2/3. Cost of what? What does ‘2/3’ mean? What is its unit? (Dollars? Clothes? Food?) It should be: Country X’s cost of producing 1 unit of food is 2/3 units of clothes. Keep in mind:

  19. 3. Remark: Answer efficiently  Use your own abbreviation only if you have explained it. Units of clothes (C) 11/15 C 11/15 units of clothes 11/15 C OR What is ‘C’? Explain the ‘C’ Don’t use the abbreviation Keep in mind:

  20. More examples will be provided later.

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