This is the capstone. It pulls together every thread of the course: the difference between absolute and comparative advantage, opportunity cost as the engine underneath, Ricardo’s two-good calculation with Maya and Sam, the gains from trade and the terms of trade that share them, the way the same logic governs teams, companies, and your own calendar, and the limits and traps that keep the model honest. Twenty-four questions, easy to hard. No notes — you already did the work.
How this exam works
One question at a time. Submitting an answer locks it for good — there is no Back button, no retry, and no restart. Your score stays hidden until the very end. You need 70% to pass. A few questions are “select all that apply” — choose every option that is correct, not just one.
What does "absolute advantage" mean?
Select an answer to continue.
Course Recap
Big picture
Comparative advantage, in one picture
- Comparative Advantage
- Two kinds of advantage
- Absolute = raw speed; comparative = lower opportunity cost — comparative decides who specializes
- Ricardo's calculation
- Maya 6 shirts / 4 loaves, Sam 1 shirt / 2 loaves: Maya does shirts (0.67 < 2), Sam does loaves (0.5 < 1.5)
- Gains from trade
- Same hours, +10 shirts of surplus; a price between 0.67 and 2 loaves/shirt makes both better off — positive-sum
- Beyond trade
- Same logic runs teams, companies, and your calendar — delegate by opportunity cost; ties to circle of competence
- Limits & traps
- The absolute-vs-comparative trap, transaction costs, switching costs, immobility, and over-specialization
- Two kinds of advantage
Key takeaways
Comparative advantage is opportunity cost applied to who does what: specialize where you give up the least, not where you are merely fastest. Because opportunity costs are reciprocals, the advantage always splits — so even someone better at everything should still trade. Done right, specialization plus trade is positive-sum: it grows the total pie and a price between the two parties’ opportunity costs shares the surplus. The same logic governs teams, companies, and your own calendar — delegate the tasks whose opportunity cost is highest. But the gains are conditional: watch for the absolute-vs-comparative trap, transaction and switching costs that can outweigh the surplus, immobile resources that never redeploy, and the fragility of over-specialization. Hold the model and its limits together, and you have the whole course.