Comparative advantage is determined by the
A)elasticities of demand for a good in two countries
B)opportunity costs of producing a good in two different countries
C)presence of absolute advantages in production
D)degrees of allocative efficiency within each economy
E)amounts of resources required to produce a good in different countries

Question

Quizplus · Accepted Answer

Comparative advantage is determined by the opportunity costs of producing a good in two different countries. This means that a country has a comparative advantage in producing a good if it has a lower opportunity cost (in terms of producing other goods) than another country. In other words, a country should specialize in producing and exporting goods that it can produce at a lower opportunity cost than other countries, and import goods that other countries can produce at a lower opportunity cost.

Comparative Advantage Is Determined by the