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Chapter 2: 10 (page 43)

What is comparative advantage?

Short Answer

Expert verified

Essentially, "comparative advantage" is the ability of a country to produce a product at a lower cost than other countries, or to have a lower opportunity cost of production.

Step by step solution

01

Step 1:

In the case where a country has two different goods, x and y, and the opportunity cost for producing good x is lower than that of producing good y, then the country exports good x and imports good y from abroad. In international trade, Ricardo developed his theory of comparative advantage.

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