A Nation Has a Comparative Advantage in the Production of Cars

question 24

Multiple Choice

A nation has a comparative advantage in the production of cars over another nation if:

• A)​it can produce cars with fewer resources than the other country.
• B)​it can produce cars at a lower opportunity cost than the other country.
• C)​it can produce cars at a higher opportunity cost than the other country.
• D)​it can produce cars at the same opportunity cost and its consumers have a stronger preference for cars than consumers in the other country.

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Definitions:

Fixed Cost

Expenses that do not change with the level of output or sales in the short term, such as rent, salaries, and insurance.

Output

The total amount of goods or services produced by a company, industry, or economy over a certain period.

Constant Returns To Scale

Long-run average total cost is constant as output increases.

Long-Run Average Total Cost

The average cost per unit of output when all inputs, including those typically fixed, are variable and optimized.