If a nation has "cheap" labor,

Question

Quizplus · Accepted Answer

All of the above statements are true. Even if a nation has cheap labor, it may still have a comparative advantage in producing goods that require lower levels of capital and skill. However, it is unlikely to have a comparative advantage in producing goods that are highly capital-intensive as those goods require expensive machinery and highly skilled workers. Furthermore, no country can have a comparative advantage in everything, and therefore, countries must specialize in producing certain goods where they have a comparative advantage in order to maximize economic efficiency and gain from international trade.

If a Nation Has "Cheap" Labor