What does the term comparative advantage mean?
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.
What is it called when a country is able to produce more of a given product than another country?
Comparative advantage is a country’s ability to produce more of a given product than can another country of comparative size; absolute advantage is a country’s ability to produce a given product relatively more efficiently than a larger country.
How does a country determine whether it has a comparative advantage?
In economic terms, a country has a comparative advantage when it can produce at a lower opportunity cost than that of trade partners. While a country cannot have a comparative advantage in all goods and services, it can have an absolute advantage in producing all goods.
What countries have comparative advantage?
For example Ireland has a comparative advantage in cheese and butter due to climate and a large amount of land suitable for dairy cows. China has a comparative advantage in electronics because it has an abundance of labor.
What country has comparative advantage?
When a country has a comparative advantage in the production of a good?
When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods.
What is comparative advantage quizlet?
What is a comparative advantage? Comparative advantage refers to the ability to produce goods and services at a lower opportunity COST, not necessarily at a greater volume. Its opportunity costs of producing goods at a lower than those of its trading partners.
When a country has a comparative advantage in the production of a good it means that it can produce?
Is comparative advantage good for developing countries?
Together, these developments improve economic output and opportunities for both developed and developing nations. These factors also cause greater specialization based on comparative advantage. Less-developed countries have benefited from globalization by leveraging their comparative advantage in labor costs.
When does a country have a comparative advantage?
In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity costOpportunity CostOpportunity cost is one of the key concepts in the study of economics and is prevalent throughout various decision-making processes. Opportunity is the than the other country.
Can a country have an absolute advantage in trade?
Common Misperceptions A country that has an absolute advantage in producing all goods still stands to benefit from trade with other countries, since the basis of the gains for trade is comparative advantage, not absolute advantage. It is not possible for an individual or country to have a comparative advantage in all goods.
Who is the founder of comparative advantage theory?
Opportunity Cost Opportunity cost is one of the key concepts in the study of economics and is prevalent throughout various decision-making processes. The than another country. The theory of comparative advantage is attributed to political economist David Ricardo, who wrote the book Principles of Political Economy and Taxation (1817).
How does Canada and Mexico have comparative advantage?
Canada and Mexico can each specialize in the good they have a comparative advantage in and exchange with one another. This lets both countries enjoy more maple syrup and avocados than they could have enjoyed without trade.