Question

Comparative advantage arises because: Select one: a. specialization and the division of labor help markets function more effectively. b. not all resources are equally effective in the production of all goods. c. specialization and the division of labor increases efficiency. d. all resources are equally effective in the production of all goods.

Answer 1

Answer:

B). Not all resources are equally effective in the production of all goods.

Explanation:

Comparative advantage is the economic term that is associated with the economy's potential to manufacture goods at a relatively lower opportunity cost as compared to the other trade participants. Such a situation primarily arises due to the reason that 'not all the resources possessed are equally efficient/effective in the production of each and every good' and therefore, the ability or advantage would be possessed by those who are able to produce goods and services at a comparatively reduced opportunity cost. Therefore, option B is the correct answer.