The concept of comparative advantage is based upon:
A)absolute labor productivity.
B)relative labor costs.
C)dollar prices of labor.
D)relative opportunity costs.

Question

Quizplus · Accepted Answer

Comparative advantage is based upon relative opportunity costs, which refers to the opportunity cost of producing one good in terms of the forgone production of another good. In other words, a country has a comparative advantage in producing a good if it can produce that good at a lower opportunity cost than another country. This allows both countries to specialize in producing the goods in which they have a comparative advantage and trade with one another, resulting in greater efficiency and welfare gains for both countries.

The Concept of Comparative Advantage Is Based Upon