Which of the following statements is true concerning comparative advantage?
A)Poor nations typically have a comparative advantage in high-tech but not agricultural goods.
B)Poor nations typically have a comparative advantage in agricultural but not high-tech goods.
C)Poor nations typically have a comparative advantage in the production of all goods.
D)Rich nations typically have a comparative advantage in the production of all goods.

Question

Quizplus · Accepted Answer

According to the theory of comparative advantage, countries should specialize in producing goods in which they have a lower opportunity cost (i.e. the amount of other goods or services that must be given up to produce one unit of a specific good). Poor nations often have a lower opportunity cost in producing agricultural goods due to factors such as favorable climate, abundant land or labor resources, and longstanding traditions. On the other hand, high-tech goods require more advanced technology, education, and capital investment, which are often lacking in developing countries. Therefore, it is more likely that poor nations have a comparative advantage in agricultural goods rather than high-tech goods.

Which of the Following Statements Is True Concerning Comparative Advantage