Question

quizlet If a country can produce more of a good or service, it has a(n) advantage. If the country can produce a good or service at lower opportunity cost, it has a(n) advantage

Answer 1

If the country can produce a good or service at a lower opportunity cost, it has a comparative advantage.

What is comparative advantage?

• In an economic model, agents have a comparative advantage over others if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to the trade.
• Comparative advantage describes the economic reality of trade advantages for people, firms, or nations as a result of disparities in their factor endowments or technological progress.
• (The absolute advantage, comparing output per time (labor efficiency) or per quantity of raw material (monetary efficiency), is typically considered more intuitive but less accurate – productive trade is possible as long as the opportunity costs of manufacturing commodities vary between countries.)

Therefore, if the country can produce a good or service at a lower opportunity cost, it has a comparative advantage.

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