📚 Learning Guide
Comparative and Absolute Advantage
easy

In international trade, a country that can produce a good at a lower _____ compared to another country has a comparative advantage.

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

absolute cost

B

opportunity cost

C

production capability

D

resource utilization

Understanding the Answer

Let's break down why this is correct

Answer

In international trade, a country that can produce a good at a lower opportunity cost compared to another country has a comparative advantage. This means that the country gives up less of other goods when it produces that specific good. For example, if Country A can produce either 10 apples or 5 oranges, and Country B can produce either 6 apples or 3 oranges, Country A has a lower opportunity cost for apples because it gives up fewer oranges when it produces them. By focusing on what they do best, both countries can trade and benefit from each other's strengths, leading to more efficient production and consumption. This idea helps explain why countries specialize in certain products and trade with one another.

Detailed Explanation

Comparative advantage means producing something at a lower opportunity cost. Other options are incorrect because Some might think absolute cost is the key; People might confuse production capability with comparative advantage.

Key Concepts

Comparative Advantage
Opportunity Cost
Absolute Advantage
Topic

Comparative and Absolute Advantage

Difficulty

easy level question

Cognitive Level

understand

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