comparative advantage is determined by which of the following

A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins. ... Country A has the comparative advantage in shirts & Country B has the comparative advantage in chairs. The country may not be the best at producing something. Their opportunity cost of secretarial work is high. The prices of goods and services are usually determined by the government. Explain when a country has a comparative advantage over another country. A contemporary example: China’s comparative advantage with the United States is in the form of cheap labor. What Is the Utility Function and How Is it Calculated? It is also a foundational principle in the theory of international trade. However, this is not a long-term solution to a trade problem. (adsbygoogle = window.adsbygoogle || []).push({}); PakMcqs.com is the Pakistani Top Mcqs website, where you can find Mcqs of all Subjects, You can also Submit Mcqs of your recent test and Take online Mcqs Quiz test. These goods are homogeneous, meaning that consumers and producers cannot differentiate between shoes from Mexico and shoes from the U.S.; nor can they differentiate between Mexican or American refrigerators.From Table 1, we can see that it takes four U.S. workers to produce 1,000 pairs of shoes, but it takes five Mexican workers to do so. Comparative advantage in sleds. Comparative advantage theory is a static theory and does not take account of some of the more dynamic elements determining world trade. 4. Absolute advantage and comparative advantage are two important concepts in economics and … Your email address will not be published. Costs are higher in one country than in another. As a renowned basketball and baseball star, Michael Jordan is an exceptional athlete whose physical abilities surpass those of most other individuals. A country can also create competitive advantage, a practice that's called national competitive advantage or comparative advantage. The following example of Comparative Advantage provides an overview of the most popular comparative advantages. The benefits of buying its good or service outweigh the disadvantages. 1. A nation with a comparative advantage makes the trade-off worth it. If a skilled mathematician earns more money as an engineer than as a teacher, they and everyone they trade with are better off when they practice engineering. Tags: Question 6 . Then Brazil has a a. Comparative Advantage vs. Absolute Advantage, Comparative Advantage vs. Ricardo considered what goods and services countries should produce, and suggested that they should specialise by allocating their scarce resources to produce goods and services for which they have a comparative cost advantage. Your email address will not be published. Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost, not necessarily at a greater volume or quality. During the seventeenth and eighteenth centuries the dominant economic philosophy was mercantilism, which advocated severe restrictions on import and aggressive efforts to increase export.The resulting export surplus was supposed to enrich the nation through the inflow of precious metals. 11th - 12th grade. In order to determine if comparative advantages exist between the two countries, you have to figure out the opportunity cost of making one unit of one of the items. The goal of this paper is to assess the empirical performance of Ricardo™s ideas. B. Which of the following is true? Comparative Advantage can be defined as a firm’s or the organization’s comparative advantage that is its ability to produce service or goods when compared to another firm or entity at a lower cost of opportunity. Use the law of comparative advantage to determine what goods countries will specialize in. A. actual differences in labor productivity between countries B. relative differences in labor productivity between countries C. Both (a) and (b) D. Neither (a) nor (b) Mcq Added by: Adden wafa. Both countries saw that it was to their advantage to stop their efforts at producing these items at home and, instead, to trade with each other in order to acquire them. A comparative advantage gives a … 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 determined by ? The trading principle formulated by Adam Smith maintained that: A) International prices are determined from the demand side of the market B) Differences in resource endowments determine comparative advantage C) Differences in income levels govern world trade patterns D) Absolute cost differences determine the immediate basis for trade 38. The theory of comparative advantage A country has a comparative advantage when it can produce a good at a lower opportunity cost than another country; alternatively, when the relative productivities between goods compared with another country are the highest. What Is the Concept of Utility in Microeconomics? In those same eight hours, though, he could also take part in the filming of a television commercial which would earn him $50,000.

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