ECONOMICS
OPPORTUNITY COST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Advantage an individual has in an activity if he / she can do it better than other people.
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Advantage an individual / nation has in producing goods / services; occurs when opportunity costs of producing goods / services are lower for that individual / nation than for other producers.
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Either A or B
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None of the above
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Detailed explanation-1: -Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. Comparative advantage is used to explain why companies, countries, or individuals can benefit from trade.
Detailed explanation-2: -A person has a comparative advantage at producing something if he can produce it at lower cost than anyone else.
Detailed explanation-3: -Comparative advantage is the ability of a country to produce a good or service for a lower opportunity cost than other countries. This economic theory was developed by David Ricardo. It was originally applied to international trade, but it can be applied to any level of business.
Detailed explanation-4: -The theory of comparative advantage holds that even if one nation can produce all goods more cheaply than can another nation, both nations can still trade under conditions where each benefits. Under this theory, what matters is relative efficiency.