📚 Learning Guide
Understanding Comparative Advantage
easy

Order the steps to determine which country should specialize in producing a good based on comparative advantage: A) Identify opportunity costs of producing goods in both countries. B) Compare the opportunity costs to find the lower one. C) Determine absolute advantages of both countries. D) Decide which country should specialize in which good based on the comparison.

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Learning Path
Learning Path

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Choose the Best Answer

A

A → B → C → D

B

C → A → B → D

C

B → A → D → C

D

A → C → B → D

Understanding the Answer

Let's break down why this is correct

Answer

To determine which country should specialize in producing a good based on comparative advantage, you first need to identify the opportunity costs of producing goods in both countries. This means figuring out what each country gives up to make one good instead of another. Next, you compare these opportunity costs to find which country has the lower cost for producing each good. After that, you can look at the absolute advantages to see which country is better at producing a good overall, but this step is not always necessary. Finally, based on your comparisons, you decide which country should specialize in which good, so they can trade and both benefit.

Detailed Explanation

First, you find out the opportunity costs for each country. Other options are incorrect because This option starts with absolute advantages, which are about who can produce more; This option compares opportunity costs after looking at absolute advantages.

Key Concepts

Comparative Advantage
Opportunity Cost
Absolute Advantage
Topic

Understanding Comparative Advantage

Difficulty

easy level question

Cognitive Level

understand

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