Which of the following is true of comparative advantage? The law of comparative advantage states that the individual with the lower opportunity cost of producing a particular output should specialize in that output . ... nations trade and specialize in the production of a good in which they have a comparative advantage.
Which is true about comparative advantage?
Popularized by David Ricardo, comparative advantage argues that free trade works even if one partner in a deal holds absolute advantage in all areas of production – that is, one partner makes products cheaper, better and faster than its trading partner.
Which of the following is true about comparative advantage comparative advantage has nothing to do with trade among nations it only is concerned with specialization within a firm comparative advantage explains trade within nations and among nations comparative advantage explains trade among nations but?
Comparative advantage explains trade within nations and among nations. Comparative advantage has nothing to do with trade among nations; it only is concerned with specialization within a firm. Comparative advantage explains trade within nations and among nations.
Which of the following is true about comparative advantage comparative advantage explains trade among nations but not within nations comparative advantage explains trade within nations but not among nations comparative advantage explains trade within nations and among nations?
Comparative advantage explains trade within nations, but not among nations. Comparative advantage explains trade within nations and among nations. Correct Answer: Comparative advantage explains trade within nations and among nations.
Which of the following is correct description of comparative advantage?
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners . A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.
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.
Who has comparative advantage example?
Taking this example, if countries A and B allocate resources evenly to both goods combined output is: Cars = 15 + 15 = 30; Trucks = 12 + 3 = 15, therefore world output is 45 m units. It is being able to produce goods by using fewer resources, at a lower opportunity cost, that gives countries a comparative advantage.
What is the relationship between comparative advantage and gains from trade?
Comparative advantage determines which country will specialize in which good . The gains from trade are only based on comparative advantage, not on absolute advantage.
What is the difference between comparative advantage and absolute advantage Brainly?
Absolute advantage is a condition in which a country can produce particular goods at a lower cost in comparison to another country. On the other hand, comparative advantage is a condition in which a country produces particular goods at a lower opportunity cost in comparison to other countries.
What is the difference between comparative advantage and absolute advantage quizlet?
Absolute advantage is the ability to produce a good using fewer inputs than another producer, while comparative advantage is the ability to produce a good at a lower opportunity cost than another producer (reflecting the relative opportunity cost). ... Comparative advantage is more important for trade.
How is comparative advantage determined?
In order to determine if comparative advantages exist between the two countries, you have to figure out the opportunity cost of making one unit of one of the items . ... Their opportunity costs are lower for each of these products relative to one another, and so there is potential for beneficial trade.
When a country has a comparative advantage?
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, who wrote the book Principles of Political Economy and Taxation (1817).
Why comparative advantage is important?
The benefit of comparative advantage is the ability to produce a good or service for a lower opportunity cost . A comparative advantage gives companies the ability to sell goods and services at prices that are lower than their competitors, gaining stronger sales margins and greater profitability.
Can 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. ... While a country cannot have a comparative advantage in all goods and services, it can have an absolute advantage in producing all goods.
What is absolute advantage example?
Absolute advantage refers to the ability of a country to produce a good more efficiently than other countries . ... For example, the Canadian economy, which is rich in low cost land, has an absolute advantage in agricultural production relative to some other countries.
What is the law of comparative advantage quizlet?
law of comparative advantage. states that countries gain when they produce items they are most efficient at producing and are at lowest opportunity cost. exports. goods and services produced in one country and sold to other countries.
