Question

In general, a capital-abundant country (such as the United States) tends to specialize in capital-intensive industry and export capital-intensive products, and import labor-intensive products. This statement is an illustration of the ____________________ of comparative advantage.

Answer 1

Answer:

Law

Explanation:

According to the law of comparative advantage, a country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.

For example, country A produces 20kg of beans and 10kg of rice. Country B produces 10kg of beans and 20kg of rice.  

for country A,  

opportunity cost of producing beans = 10/20 = 0.5

opportunity cost of producing rice = 20/10 = 2

for country B,  

opportunity cost of producing rice = 10/20 = 0.5

opportunity cost of producing beans = 20/10 = 2

Country A has a comparative advantage in the production of beans and country B has a comparative advantage in the production of rice