AP Microeconomics Practice Question 1
Suppose that there are only two goods: x and y. Which of the following is NOT correct?
Correct Answer: A
A Application-of-definition questions can be very tricky. The best approach is to see if the answer choice "fits" the definition or not. Given past classical examples, (B), (C), and (D) can be quickly eliminated. (See the Specialization and Comparative Advantage section in Chapter 5 for more discussion on this.) This question has one more wrinkle in (E), forcing test takers to think about the possibility of having a comparative advantage in producing both goods (which cannot be possible). It is possible to have absolute advantage in producing both goods, but not have comparative advantage in producing both goods (as one can only have a comparative advantage in only one good). Therefore the answer is (A).