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Chapter 33: Q. 28. (page 804)

Can a nation’s comparative advantage change over time? What factors would make it change?

Short Answer

Expert verified

Nation's comparative advantage change over time with certain important factors.

Step by step solution

01

Step 1. Meaning of comparative advantage.

The ability to produce a product at a relatively lower cost or to produce a higher quantity at the same cost is known as absolute advantage. While, the ability to produce at a realtively lower opportunity cost is known as competitive advantage.

02

Step 2. Nation's comparative advantage.

Basically, a nations' comparative advantage can change over time if it acquires efficiency in the production of a good or services due to technological and or social changes.

03

Step 3. Important factors that result into change in comparative advantage.

a) Geographical diversity.

b) Tradition.

c) Productivity Differences.

d) Technology.

e) Human skills.

f) Product life cycle.

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Most popular questions from this chapter

Look at Table 33.9. Is there a range of trades for which there will be no gains?

Why might intra-industry trade seem surprising from the point of view of comparative advantage?

Does intra-industry trade contradict the theory of comparative advantage?

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

Why might a low-income country put up barriers to trade, such as tariffs on imports?
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