What is comparative advantage based on?
A) capital costs
B) labour costs
C) dollar price
D) opportunity costs

Question

Quizplus · Accepted Answer

Comparative advantage is based on opportunity costs, which refers to the trade-offs one has to make to produce one good over another. In other words, it is the cost of giving up one opportunity to pursue another opportunity. By comparing opportunity costs between two countries or individuals, it is possible to determine which country/individual has a comparative advantage in a specific product or service. The country/individual with the lowest opportunity cost has the comparative advantage and should specialize in producing that product or service.

What Is Comparative Advantage Based On