A nation's comparative advantage in the production of an item is determined by:
A) which country has already specialized in the production of the item.
B) the total and marginal costs of producing the item.
C) the opportunity cost of producing the item relative to a trading partner's opportunity cost.
D) wage rates and other input costs.

Question

Quizplus · Accepted Answer

Comparative advantage is determined by the opportunity cost of producing a good relative to another country. A nation has a comparative advantage if it can produce a good at a lower opportunity cost than its trading partner.

A Nation's Comparative Advantage in the Production of an Item