A country has a comparative advantage when it can produce a good at a lower cost in terms of other goods. Countries that specialize based on comparative advantage gain from trade. True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain. False.
What is the principle of specialization and trade based on comparative advantage?
The principle of specialization and trade based on comparative advantage says specialization and trade help an individual or a country to increase their consumption possibilities to which point go beyond that individual or country PPC's.
Does a country have an absolute advantage over another country?
A country has an absolute advantage over another country in producing a good if it uses fewer resources to produce that good. Absolute advantage can be the result of a country’s natural endowment. For example, extracting oil in Saudi Arabia is pretty much just a matter of “drilling a hole.”
