Asked by Nicholas Grenville on May 06, 2024
Verified
The law of comparative advantage states that
A) countries grow fastest if exports exceed imports,with payment surpluses being received in gold.
B) mutually beneficial trade can always take place between two countries whose pre-trade relative opportunity costs differ.
C) two countries can both gain from trade only when they have very different tastes and preferences.
D) trade benefits a country only if it has comparative advantages in all goods and services.
Comparative Advantage
The ability of an entity to produce goods or services at a lower opportunity cost than others, leading to more efficient trade possibilities.
Opportunity Costs
Opportunity costs represent the benefits an individual, investor, or business misses out on when choosing one alternative over another.
Mutually Beneficial Trade
A trade agreement between parties that provides gains or advantages to all involved parties.
- Demystify the concepts of comparative and absolute advantage as they apply to international trade.
- Clarify the pros and cons associated with specialization and the practice of trade.
Verified Answer
Learning Objectives
- Demystify the concepts of comparative and absolute advantage as they apply to international trade.
- Clarify the pros and cons associated with specialization and the practice of trade.
Related questions
According to the Theory of Comparative Advantage;a Good Should Be ...
If the USHas a Comparative Advantage in Almonds Relative to ...
Country a Can Produce Both Wheat and Oranges Using Fewer ...
If Country a Has a Higher Opportunity Cost in Producing ...
If a Nation Has a Comparative Advantage in the Production ...