According to the Principle of Comparative Advantage, Countries

question 14

Multiple Choice

According to the principle of comparative advantage, countries

• A) should specialize in the production of goods that they enjoy consuming.
• B) with a comparative advantage in the production of every good need not specialize.
• C) should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.
• D) should specialize in the production of goods for which they use fewer resources in production than their trading partners.

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Definitions:

Differentiated Product

A product that is distinguished from similar products in the market by unique characteristics, leading to customer perception that there is no perfect substitute.

Market Demand

The total quantity of a product or service that consumers in a market are willing and able to purchase at various prices over a specified period.

Competitive Price-Searcher

A market structure where businesses set their prices based on the competitive landscape and their unique value proposition, often in imperfectly competitive markets.

Economic Losses

The monetary losses incurred by businesses or economies due to factors like poor management, decreased demand, or external disruptions.