Answered: 3 1. Define comparative cost advantage.…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 11RQ: Is it possible to have a comparative advantage in the production of a good but not to have an...

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3 1. Define comparative cost advantage. Suppose there are two persons in the society named Anika and Abrar. Both of them produce a particular quantity of two goods i.e., bread and ice-cream. Given terms of trade 6:10, do they gain out of trade? Explain.

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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