ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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higher per unit costs
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lower opportunity cost
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lower per unit costs
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higher opportunity cost
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Detailed explanation-1: -Popularized by David Ricardo, comparative advantage argues that free trade works even if one partner in a deal holds absolute advantage in all areas of production – that is, one partner makes products cheaper, better and faster than its trading partner.
Detailed explanation-2: -In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another country. The theory of comparative advantage is attributed to political economist David Ricardo, who wrote the book Principles of Political Economy and Taxation (1817).
Detailed explanation-3: -Countries specialize in the production of goods for which they have a comparative advantage. It can be mutually beneficial for two nations to specialize in goods for which they have a comparative advantage and then trade with one another.
Detailed explanation-4: -According to the theory of comparative advantage, specialization and free trade will benefit: All trading partners who specialize in goods where they have comparative advantage.