The Principle of Comparative Advantage States That, Regardless of the Price

question 45

True/False

The principle of comparative advantage states that, regardless of the price at which trade takes place, everyone will benefit from trade if they specialize in the production of the good for which they have a comparative advantage.

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Definitions:

Total Surplus

is the sum of consumer surplus and producer surplus, representing the overall economic benefit to society from trade or market activity.

Consumer Surplus

The split between the sum consumers would ideally pay for a good or service and the sum they actually end up paying.

Producer Surplus

The discrepancy between the price at which sellers are prepared to offer a product and the actual selling price they obtain.

Market Failure

The failure of a market to be efficient; when the individual pursuit of self-interest leads to bad results for society as a whole.