Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 19: Q1 (page 460)

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

Short Answer

Expert verified

The statement - comparative advantage must be due to natural elements, is False

Step by step solution

01

Comparative Advantage Meaning

Comparative Advantage means a country is able to produce a good with lower opportunity cost, ie lesser amount of other good sacrificed.

For eg : If country A can produce good 1 by trading off 2 units of good 2, & country B can produce it by trading 3 units of other good. Then, country A has comparative advantage in good 1.

02

Causes of Comparative advantage Concept

Comparative advantage can be due to natural advantages : like climate & natural reserves.

However, it can be due to many other factors

  • Human Resource & skills led efficiency
  • Technical know how led efficiency

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What is intra-industry trade?

Are the gains from international trade more likely

to be relatively more important to large or small

countries?

In France it takes one worker to produce one sweater, and one worker to produce one bottle of wine. In Tunisia it takes two workers to produce one sweater, and three workers to produce one bottle of wine. Who has the absolute advantage in production of sweaters? Who has the absolute advantage in the production of wine? How can you tell?

Does intra-industry trade contradict the theory of

comparative advantage?

Table 19.15 shows how the average costs of production for semiconductors (the “chips” in computer memories) change as the quantity of semiconductors built at that factory increases.

a. Based on these data, sketch a curve with quantity produced on the horizontal axis and average cost of production on the vertical axis. How does the curve illustrate economies of scale?

b. If the equilibrium quantity of semiconductors demanded is 90,000, can this economy take full advantage of economies of scale? What about if quantity demanded is 70,000 semiconductors 50,000 semiconductors? 30,000 semiconductors?

c. Explain how international trade could make it possible for even a small economy to take full advantage of economies of scale, while also benefiting from competition and the variety offered by several producers.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free