What is comparative advantage based on? A. dollar price B. labour costs C. opportunity costs D. capital costs

When a country produces a good or service at a lower opportunity cost than its trading partners, it…

Answered: What is comparative advantage based on?…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter34: World Trade Equilibrium

Section: Chapter Questions

Problem 9E

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What is comparative advantage based on?

A. dollar price
B. labour costs
C. opportunity costs
D. capital costs

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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