Select the correct definition of the term "comparative advantage." the ability to produce a good or service at a higher opportunity cost than another the ability to produce a good or service at a lower opportunity cost than another the ability to produce less of a good or service than another over a specified time period a nation offering more favorable trade policy with its allies than with other countries the ability to produce more of a good or service than another over a specified time period When trading with more developed countries, less developed countries have a comparative advantage in the production of all goods or services. less developed countries do not have a comparative advantage in the production of any goods or services. less developed countries have a comparative advantage in the production of some goods or services.

Question

Business

Aurora Crosby

4 December, 11:48

Select the correct definition of the term "comparative advantage." the ability to produce a good or service at a higher opportunity cost than another the ability to produce a good or service at a lower opportunity cost than another the ability to produce less of a good or service than another over a specified time period a nation offering more favorable trade policy with its allies than with other countries the ability to produce more of a good or service than another over a specified time period When trading with more developed countries, less developed countries have a comparative advantage in the production of all goods or services. less developed countries do not have a comparative advantage in the production of any goods or services. less developed countries have a comparative advantage in the production of some goods or services.

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Answers (1)

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Tamara Jennings · Answer 1

The ability to produce a good or service at a lower opportunity cost than another.

Explanation:

"Comparative advantage" is an economic term first introduced by economist David Ricardo in 1817. And to understand this term, first one must have solid grasp on what opportunity cost means. The opportunity cost is defined as the potential benefit that you lose when choosing one option over another; to make it more simple, here is an example: When you finish high school, you have two options whether to go to college to study or you start working. If you decide to study, the opportunity cost is the money you would recieve as payment for your work. Either way, a decision has to be made and both options have benefits that you would lose if you choose the other.

Now, having cleared this, you can identify a comparative advantage when a person, company or country is able to produce goods or services more efficiently than others and, rather than producing everything, they can focus on what gives them higher margins. This way opportunity costs are minimized and earnings are increased.