Comparative Advantage Flashcards
1
Q
Comparative Advantage
A
the ability of an individual or group to provide a product or service more efficiently than another individual or group
2
Q
specialization
A
occurs when an individual or group focuses on providing a product or service because of their comparative advantage
3
Q
remember this…
A
trade is advantageous when one entity focuses on their comparative advantage relative to another entity
4
Q
when individuals or groups exchange products or services…
A
they can maximize their advantages for the good of everyone
5
Q
note
A
- a company specializes in one good
- international commerce
- to use 100% of its resources to produce corn
- 30 vehicles
- those who can produce a product at a lower opportunity cost should specialize in that good
- to use 100% of its resources to produce timber
- specialization and exchange
- both nations should exchange their specialized products
- italy should produce statues and the US should produce wine
- comparative advantage
