The Principle of Comparative Advantage

question 10

Multiple Choice

The principle of comparative advantage

• A)does not hold true in cases of constant opportunity costs.
• B)does not hold true in cases of increasing opportunity costs.
• C)holds true in cases of constant opportunity costs but not in cases of increasing opportunity costs.
• D)holds true in cases of increasing opportunity costs, as it does with constant opportunity costs.
• E)may or may not hold true in cases of increasing opportunity costs.

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Definitions:

Marginal Utility

The additional satisfaction or benefit that a consumer derives from consuming an additional unit of a good or service.

Equilibrium

A state where supply and demand balance, and as a result, prices become stable.

Unit Price

The cost assigned to a single unit of a product or service, facilitating price comparisons among similar products based on per unit costs.

Marginal Utility

The additional satisfaction or utility a consumer gains from consuming one more unit of a good or service.