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Chapter 33: Q. 1. (page 802)

True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.

Short Answer

Expert verified

The statement is not true i.e. it is false statement.

Step by step solution

01

Step 1. Meaning of comparative advantage.

It is similar to opportunity cost means it should be followed for gain in trade under comparative advantage. Under this, the cost of productive of good is analyzed and compared with other good.

02

Step 2. Reason why it is not true.

Basically, the above statement i.e. the source of comparative advantage must be natural elements like climate and mineral deposits is false. As the source of comparative advantage may be natural element but it is not a compulsion. Climate and mineral deposits which are the natural element are one of the source of advantage. Other than climate and mineral deposits, it also have other sources like external economies, geographical location, etc .

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