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A country has a comparative advantage in producing a good if:

A) it can produce that good at a lower opportunity cost.
B) it will find trade most beneficial when it trades with another country that has a comparative advantage in the same good.
C) it will not find trade beneficial because other country(ies) won't have a comparative advantage in other goods.
D) it must also have an absolute advantage in the good

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Alice Sejake
Alice SejakeLv10
12 Jan 2021
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Related questions

The fundamental force driving international trade is comparative:

A. Advantage: a country exports those goods that have high prices

B. Abundance: the country that produces more than it needs exports the good

C. Advantage: the country with the lower opportunity cost of production exports the good

D. Cost: a country trades with other countries that produce cheaper goods

1. The law of comparative advantage says that:

A. whoever has an absolute advantage in producing a good also has a comparative advantage in producing that good.

B. whoever has a comparative advantage in producing a good also has an absolute advantage in producing that good

C. the individual with the lowest opportunity cost of producing a particular good should produce it

D. comparative advantage exists only when one person has an absolute advantage in the production of two goods

2. A country has an absolute advantage in the production of a good if that country:

A. can produce good using fewer resources than another country would require

B. has the lowest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources

C. has the greatest opportunity cost of producing the good, regardless of whether it is produced with the fewest resources

D. has the lowest opportunity cost of producing the good and can produce it with the fewest resources

3. A production possibilities frontier can shift outward for all of the following reasons except:

A. a larger workforce

B. a decrease in the size of the labor force

C. an increase in the skills of the labor force

D. an improvement in technology

Discuss and explain the difference between the two.

The principle upon which Adam Smith first claimed that free trade benefits all countries. It holds that a country benefits from trade when it produces a particular good at a lower cost (in terms of labor input) than it costs to produce the good in any other country. By specializing the in the production and export of this good and importing goods whose production costs are higher than in other countries, the country can consume more of both goods. In trade theories, this principle was later replaced by the principle of comparative advantages.

Comparative Advantage is first fully stated by David Ricardo in the early nineteenth century, this concept holds that a country has a comparative advantage in a good if it can produce that good more cheaply than it can produce other goods. By specializing in the production of goods in which it holds a comparative advantage and importing the other goods, the country can consume more of all goods. In contrast to Adam Smith, therefore, this principle states that a country need not have an absolute advantage in any good to benefit from trade. The principle provides a powerful justification for liberal international trade by asserting that all countries benefit from such trade.

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