Asked by Brendan Aikin on May 25, 2024
Verified
Comparative advantage is based on opportunity costs.
Comparative Advantage
A principle stating that if a country produces a good at a lower opportunity cost than another, it has a comparative advantage.
Opportunity Costs
The expense incurred from not selecting the subsequent preferable choice when a decision is made.
- Comprehend the concepts of comparative and absolute advantage in production.
Verified Answer
JM
Joshua MinkutuMay 28, 2024
Final Answer :
True
Explanation :
Comparative advantage is based on the idea that countries should specialize in producing the goods and services that they can produce at a lower opportunity cost than other countries. Opportunity cost is the value of the next best alternative that must be given up in order to choose a certain option. Therefore, comparative advantage is directly related to opportunity cost.
Learning Objectives
- Comprehend the concepts of comparative and absolute advantage in production.