Comparative Advantage

Question 1

Comparative Advantage

Answer 1

the ability of an individual or group to provide a product or service more efficiently than another individual or group

Question 2

specialization

Answer 2

occurs when an individual or group focuses on providing a product or service because of their comparative advantage

Question 3

remember this…

Answer 3

trade is advantageous when one entity focuses on their comparative advantage relative to another entity

Question 4

when individuals or groups exchange products or services…

Answer 4

they can maximize their advantages for the good of everyone

Question 5

note

Answer 5

• a company specializes in one good
• international commerce
• to use 100% of its resources to produce corn
• 30 vehicles
• those who can produce a product at a lower opportunity cost should specialize in that good
• to use 100% of its resources to produce timber
• specialization and exchange
• both nations should exchange their specialized products
• italy should produce statues and the US should produce wine
• comparative advantage