What is the relationship between production costs and comparative advantage? Comparative advantage considers, "How much am I giving up to produce this good in this country?" Comparative advantage happens when the production costs for both trading partners are the same. Incorrect. Learning Objective: Show the relationship between production costs and comparative advantage Comparative advantage identifies the good for which the producer's absolute advantage is relatively smaller. Comparative advantage identifies where the producer's absolute productivity disadvantage is relatively larger.

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.