Question:
Comparative advantage means that one country can produce
(1) more of a certain product than another country.
(2) a certain product at lower marginal cost than the other country.
(3) a certain product at lower long run average total cost than another country.
(4) a certain product at lower opportunity cost than the another country.
(5) more of a certain product than another product.
Correct Answer:
(4)
Answer Explanation:
According to David Ricardo’s theory, comparative advantage is determined strictly by relative internal sacrifices, not absolute volume or monetary cost. A country has a comparative advantage if it can produce a good at a lower opportunity cost (sacrificing less of an alternative good) than its trading partner.
Topic: International Trade Year: 2019
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