What is a comparative advantage example?

Comparative advantage is what you do best while also giving up the least. For example, if you’re a great plumber and a great babysitter, your comparative advantage is plumbing. That’s because you’ll make more money as a plumber.

What is the basic message of the theory of comparative advantage?

– The theory of comparative advantage suggests that trade is a positive sum game in which all countries that participate realize economic gains. Even if one country has an advantage in both markets.

What are the four main sources of comparative advantage?

What are the Sources of Comparative Advantage? Comparative advantage is determined by a country’s resources, that is the land, labour, capital and enterprise.

Which of the following statements best describes a comparative advantage?

Which of the following statements best describes a comparative advantage? It is the benefit a country has in a given industry if it can make products at a lower opportunity cost than other countries.

How do you start calculating a person’s comparative advantage?

How do you start calculating a person’s comparative advantage? You calculate their opportunity cost associated with an activity.

How can comparative advantage be improved?

It is being able to produce goods by using fewer resources, at a lower opportunity cost, that gives countries a comparative advantage. The gradient of a PPF reflects the opportunity cost of production. Increasing the production of one good means that less of another can be produced.

What behavior does the phenomenon known as comparative advantage encourage?

What behavior does the phenomenon known as comparative advantage encourage? comparing the benefit of one additional unit with its cost to produce.

What factors determine comparative advantage?

The existence of a comparative advantage is, in turn, affected by things such as abundance, productivity, cost of labor, land, and capital. Other factors also might influence a country’s comparative advantage in practical terms, such as a highly developed financial system or economies of scale.

Which of the following best describes the application of comparative advantage quizlet?

Which of the following best describes the application of comparative advantage? Development focused on maximizing economic efficiency and well-being by focusing resources to produce whatever the country can produce relatively well compared to other countries and exports them in exchange for goods it does not produce.

What are the advantages of comparative advantage?

The benefit of comparative advantage is the ability to produce a good or service for a lower opportunity cost. A comparative advantage gives companies the ability to sell goods and services at prices that are lower than their competitors, gaining stronger sales margins and greater profitability.

What is the relationship of comparative advantage to production possibilities?

Comparative advantage drives countries to specialize in the production of the goods for which they have the lowest opportunity cost, which leads to increased productivity.

What is the best definition of comparative advantage?

Definition of comparative advantage Comparative advantage occurs when one country can produce a good or service at a lower opportunity cost than another. This means a country can produce a good relatively cheaper than other countries

Why does the UK have a comparative advantage in book production?

The UK has a comparative advantage in producing books. This is because it has a lower opportunity cost of 0.25 (1/4) compared to India’s 0.66 (2/3) If each country now specializes in one good then, assuming constant returns to scale, output will double.

Who invented the law of comparative advantage?

The law of comparative advantage is popularly attributed to English political economist David Ricardo and his book “On the Principles of Political Economy and Taxation” in 1817, although it is likely that Ricardo’s mentor James Mill originated the analysis.

Which country has a comparative advantage in clothes?

The United States enjoys a comparative advantage in cloth. In France, the country specializes in wine and produces 1,000 barrels. Recall that the opportunity cost of 1 barrel of wine in the United States is 1 piece of cloth.