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.
What does it mean when a country has a comparative advantage in the production of a good compared to another country?
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 in the production of a good?
Transcribed image text: 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.
What is the theory of comparative advantage?
Comparative advantage, economic theory, first developed by 19th-century British economist David Ricardo, that attributed the cause and benefits of international trade to the differences in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities among countries.
Which country has a comparative advantage for producing?
Again recall that comparative advantage was defined as the opportunity cost of producing goods. Since Saudi Arabia gives up the least to produce a barrel of oil, (1⁄4 < 2 in Table 19.4) it has a comparative advantage in oil production.
What is the biggest factor that leads a country to specialize in certain products?
Comparative advantage drives countries to specialize in the production of the goods for which they have the lowest opportunity cost, which leads to increased productivity.
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.
Why can’t a country have comparative advantage in both goods?
In international trade, no country can have a comparative advantage in the production of all goods or services. In economic terms, a country has a comparative advantage when it can produce at a lower opportunity cost than that of trade partners.
How do countries know when they have a comparative advantage in the production of a good group of answer choices?
Countries have a comparative advantage in production when they can produce a good or service at a lower opportunity cost than other producers . Countries are better off if they specialize in producing the goods for which they have a comparative advantage.
When a country has a comparative advantage in the production of a good quizlet?
A country has comparative advantage in the production of a good if it can produce that good at a lower opportunity cost relative to another country . the difference between the opportunity cost of producing the product domestically versus the cost of purchasing the product from another country receives from trade.
What is comparative advantage give an example?
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 are the four main sources of comparative advantage?
Comparative advantage is determined by a country’s resources, that is the land, labour, capital and enterprise .
Who has comparative advantage example?
For example, if a country is skilled at making both cheese and chocolate , they may determine how much labor goes into producing each good. If it takes one hour of labor to produce 10 units of cheese and one of of labor to produce 20 units of chocolate, then this country has a comparative advantage in making chocolate.
Which country has a comparative advantage in the production of honey?
The United States has a comparative advantage in the production of honey and Canada has a comparative advantage in the production of maple syrup.
Which country has comparative advantage in making wheat?
Canada has a comparative advantage in the production of wheat because she has a lower opportunity cost in the production of wheat.
Which country or countries have an absolute advantage and comparative advantage in shoes?
The United States has an absolute advantage in productivity with regard to both shoes and refrigerators; that is, it takes fewer workers in the United States than in Mexico to produce both a given number of shoes and a given number of refrigerators.
