In economics,
a comparative advantage
occurs when a country can produce a good or service at a lower opportunity cost. The than another country. The theory of comparative advantage is attributed to political economist David Ricardo
What does it mean when a country specializes in producing certain products?
Specialization
refers to the tendency of countries to specialize in certain products which they trade for other goods, rather than producing all consumption goods on their own. Countries produce a surplus of the product in which they specialize and trade it for a different surplus good of another country.
What does it mean when a country has a comparative advantage in the production of a good compared to another country?
A comparative advantage exists when a country
can produce goods at a lower opportunity cost compared to other countries
.
What does it mean if a country has a comparative advantage in producing and exporting something how do tariffs affect imports?
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. … Comparative advantage suggests that
countries will engage in trade with one another
, exporting the goods that they have a relative advantage in.
When a country has a comparative advantage?
Comparative advantage refers to the
ability to produce goods and services at a lower opportunity cost
, not necessarily at a greater volume or quality. Comparative advantage is a key insight that trade will still occur even if one country has an absolute advantage in all products.
Which countries are most directly affected by Nafta?
THE EFFECTS OF NAFTA
Trade has grown sharply between the three nations who are parties to NAFTA but that increase of trade activity has resulted in rising trade deficits for the U.S. with
both Canada and Mexico
-;the U.S. imports more from Mexico and Canada than it exports to these trading partners.
What is the best example of specialization?
When an economy can specialize in production, it benefits from international trade. If, for example, a country can produce
bananas
at a lower cost than oranges, it can choose to specialize and dedicate all its resources to the production of bananas, using some of them to trade for oranges.
In what circumstances might a country not benefit from trade with another country?
If a trade was bad
, the countries simply reject it, it is a consensual trade. First, if the opportunity costs are equal between the two countries, there is nothing to gain from specialization, the countries are identical and there is no benefit from producing the good abroad rather than at home.
What is it called when a country is able to produce more than another country?
Absolute advantage
describes a situation in which an individual, business or country can produce more of a good or service than any other producer with the same quantity of resources.
When a country has a comparative advantage in the production of a good it means that it can produce?
When a country has a comparative advantage in the production of a good, it means that it
can produce this good at a lower opportunity cost than its trading partner
. Then the country will specialize in the production of this good and trade it for other goods.
Who benefits from a tariff?
Tariffs mainly benefit
the importing countries
, as they are the ones setting the policy and receiving the money. The primary benefit is that tariffs produce revenue on goods and services brought into the country. Tariffs can also serve as an opening point for negotiations between two countries.
How do tariffs affect a nation’s economy?
Historical evidence shows that
tariffs raise prices and reduce available quantities of goods and services for U.S. businesses
and consumers, which results in lower income, reduced employment, and lower economic output. Tariffs could reduce U.S. output through a few channels.
What happens when a tariff is imposed on an import?
Tariffs increase the prices of imported goods
. … Because the price has increased, more domestic companies are willing to produce the good, so Qd moves right. This also shifts Qw left. The overall effect is a reduction in imports, increased domestic production, and higher consumer prices.
What is an example of a comparative advantage?
Comparative advantage is
what you do best while also giving up the least
. For example, if you’re a great plumber and a great babysitter, your comparative advantage is plumbing. That’s because you’ll make more money as a plumber.
What happens when a country has absolute advantage in all goods?
These high-income countries can produce all products with fewer resources than a low-income country. … Even when one country has an absolute advantage in all products,
trade can still benefit both sides
. This is because gains from trade come from specializing in one’s comparative advantage.
What is opportunity cost in everyday life?
In daily life, opportunity costs are
the benefits or pleasures foregone by choosing one alternative over another
. For instance, if you decide to spend money eating out for dinner in a restaurant, then you forgo the opportunity to eat a home-cooked meal.
