Asked by Dameion Goodwin on Jun 20, 2024
Verified
According to the theory of comparative advantage;a good should be produced in that nation where
A) the production possibilities line lies further to the right than the trading possibilities line.
B) its cost is least in terms of alternative goods that might otherwise be produced.
C) its absolute cost in terms of real resources used is least.
D) its absolute money cost of production is least.
Comparative Advantage
The ability of a country, individual, company, or region to produce a good or service at a lower opportunity cost than a competitor, leading to more efficient international trade and allocation of resources.
Production Possibilities Line
A graphical representation that shows the maximum possible output combinations of two products or services an economy can achieve when all resources are fully and efficiently utilized.
Trading Possibilities Line
A graphical representation illustrating the maximum amount of one good that a country can trade for another, given fixed resources.
- Expound upon the ideas of comparative and absolute advantage in the realm of trade.
- Comprehend the function of opportunity costs in establishing trading relationships.
Verified Answer
PS
Putri SherlyJun 25, 2024
Final Answer :
B
Explanation :
The theory of comparative advantage suggests that a good should be produced in the country where its opportunity cost is the lowest. This means that the country should produce the good in which it has a comparative advantage, i.e. the good where its cost of production is least in terms of alternative goods that might otherwise be produced. Therefore, choice B is the correct answer. Choices A, C, and D are incorrect because they do not fully capture the essence of comparative advantage.
Learning Objectives
- Expound upon the ideas of comparative and absolute advantage in the realm of trade.
- Comprehend the function of opportunity costs in establishing trading relationships.