Question

Bangladesh exports shirts, the making of which is labor-intensive, to the UnitedStates. The likely source of Bangladesh's comparative advantage in shirts is:
A. a hotter climate, which makes it possible to produce shirts outdoors, eliminating the need for factory buildings and hence reducing costs.
B. superior production technology.
C. that in comparison with the United States, Bangladesh is a labor-abundantcountry.
D. the higher labor productivity in Bangladesh

Answer 1

Answer:

The correct answer is A. a hotter climate, which makes it possible to produce shirts outdoors, eliminating the need for factory buildings and hence reducing costs.

Explanation:

The principle of comparative advantage explains why countries benefit from international trade. This term was first raised by Adam Smith when referring to the specialization in production. Later it was David Ricardo who developed the concept as it is understood today, in his book "On the Principles of Political Economy and Taxation", published in 1817, where he develops Your own trade theory.

When comparing two countries, even if one of them has an absolute advantage in the production of two goods in relation to the other, it may be possible for both countries to obtain a profit by trading between them. The key lies in the fact that each country should only produce that good that has the lowest opportunity cost. When a country specializes in goods in which it has a comparative advantage, total production increases.

Following Ricardo's example, Portugal can produce cloth and wine with fewer productive factors than England. However, the opportunity cost of Portugal when producing wine is lower than when producing cloth, while in the case of England the opportunity cost of producing cloth is lower. If Portugal specializes in the production of wine and imports cloth, and England specializes in the production of cloth and imports wine, both countries can benefit from their comparative advantage.