Answered: Historical evidence suggests that, when…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Historical evidence suggests that, when technology matures and industrial production moves to countries with lower costs, products which in the past were exported will start being imported.
The theory that foresaw this trade reversal goes under the name of:
a. Factor endowment reversal
b. Theory of overlapping demand
c. Theory of product life cycle
d. Theory of dynamic comparative advantage
e. None of the above

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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