A Person Has a Comparative Advantage in Activity X When

question 189

Multiple Choice

A person has a comparative advantage in activity X when that person's:

• A) opportunity cost of performing that activity is very high.
• B) ability to perform that activity exceeds that of all other people.
• C) government negotiates a favorable trade agreement.
• D) opportunity cost is lower for him than for other trading partners.

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Definitions:

Capital Requirements

The total amount of capital needed for a business to carry out its operations, including costs for assets, staffing, and day-to-day expenses.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Undifferentiated Products

Goods or services that are viewed as interchangeable with others in the market, lacking distinct features to stand out from competitors.

High Switching Costs

High switching costs are barriers that prevent customers from changing products or services, due to financial, emotional, time-related, or effort-based factors.