Asked by Jaime Andres on Jun 30, 2024
Verified
An economy is said to have a comparative advantage in the production of a good if it can produce that good:
A) with more resources than another economy.
B) at a higher opportunity cost than another economy.
C) outside its production possibility frontier.
D) at a lower opportunity cost than another economy.
Comparative Advantage
The ability of a country, company, or individual to produce a particular good or service at a lower opportunity cost than others, leading to more efficient trade and production.
Opportunity Cost
The value of the next best alternative forgone as the result of making a decision.
Production Possibility Frontier
A curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, technology).
- Grasp the essence of comparative advantage and its contribution to the specialization of production within different countries or individuals.
- Establish which entities feature a comparative or absolute lead by investigating opportunity costs.
Verified Answer
SD
Sarah DouglasJul 06, 2024
Final Answer :
D
Explanation :
A country has a comparative advantage in producing a good if it can produce that good with a lower opportunity cost than another country. Opportunity cost is the cost of giving up the production of one good in order to produce another good. So, a lower opportunity cost means that a country gives up less production of another good in order to produce the good in question. This allows the country to produce more of both goods in total and thereby gain a comparative advantage in the production of that good.
Learning Objectives
- Grasp the essence of comparative advantage and its contribution to the specialization of production within different countries or individuals.
- Establish which entities feature a comparative or absolute lead by investigating opportunity costs.