When a country has a comparative advantage in the production of a good?

When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods.

What determines a country’s limits to acceptable terms of trade?

The limits of the terms of trade are determined by the opportunity costs of the two countries. For example, the terms of trade clothing will be between 5/3 and 3. Suppose the terms of trade are 2 units of food per unit of clothing.

Which country has the absolute advantage in airplanes?

the U.S.
–Absolute advantage in airplanes: the U.S.

When a nation has a comparative advantage in producing a product then in comparison with any other nation it can produce that product?

Comparative advantage is where one nation can produce a good at a lower opportunity cost than another. It differs from absolute advantage in the fact that it considers opportunity cost. So the nation may be not have an absolute advantage, but is able to produce a good at a lower opportunity cost.

When a country has a comparative advantage it can produce quizlet?

A country has a comparative advantage when a good can be produced at a lower cost in terms of other goods. Countries that specialize based on comparative advantage ? from trade. What is absolute advantage? When one nation can produce a product at lower cost relative to another nation.

What is comparative advantage example?

For example, if a country is skilled at making both cheese and chocolate, they may determine how much labor goes into producing each good. If it takes one hour of labor to produce 10 units of cheese and one of of labor to produce 20 units of chocolate, then this country has a comparative advantage in making chocolate.

Who has comparative advantage in producing wheat?

References (14) … On import parity price, Pakistan has comparative advantage in producing wheat.

What is absolute advantage comparative advantage?

Absolute Advantage: The ability of an actor to produce more of a good or service than a competitor. Comparative Advantage: The ability of an actor to produce a good or service for a lower opportunity cost than a competitor.

What countries have comparative advantage?

For example Ireland has a comparative advantage in cheese and butter due to climate and a large amount of land suitable for dairy cows. China has a comparative advantage in electronics because it has an abundance of labor.

How do you determine a country’s comparative advantage?

To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. The country with the lowest opportunity cost has the comparative advantage.

How does comparative advantage benefit developing nations?

The benefit of comparative advantage is the ability to produce a good or service for a lower opportunity cost. … Lower costs aren’t the only benefit of comparative advantage. Entering into trade with other countries can also create job opportunities where they may have been done before.

What happens when a country has absolute advantage in all goods?

These high-income countries can produce all products with fewer resources than a low-income country. … Even when one country has an absolute advantage in all products, trade can still benefit both sides. This is because gains from trade come from specializing in one’s comparative advantage.

When a person has a comparative advantage in producing a good or service the person has?

Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost, not necessarily at a greater volume or quality. Comparative advantage is a key insight that trade will still occur even if one country has an absolute advantage in all products.

What affects comparative advantage?

The existence of a comparative advantage is, in turn, affected by things such as abundance, productivity, cost of labor, land, and capital. Other factors also might influence a country’s comparative advantage in practical terms, such as a highly developed financial system or economies of scale.

Why is comparative advantage more important for trade?

The existence of a comparative advantage allows both parties to benefit from trading, because each party will receive a good at a price that is lower than its opportunity cost of producing that good.

What is the comparative advantage of the Philippines over other countries?

The Philippines has a revealed comparative advantage in exporting from high technology industries. They constitute more than 50 percent of total goods exports, and they were affected during the global financial crisis.

What are the factors that determine what goods a country has a comparative advantage in what are the sources of comparative advantage?

Comparative advantage is determined by a country’s resources, that is the land, labour, capital and enterprise. The quality of capital – is the production of goods and services using the latest technology?

How does a country use the idea of comparative advantage to decide when to trade?

comparative advantage is the key to determining specialization and trade. Countries have a comparative advantage in production when they can produce a good or service at a lower opportunity cost than other producers. … They can then trade for the goods for which other countries have a comparative advantage.

What are the advantages of the Philippines in other countries?

The Filipino workforce is one of the most compelling advantages the Philippines has over any other Asian country. With higher education priority, the literacy rate in the country is 94.6% – among the highest. English is taught in all schools, making the Philippines the world’s third largest English-speaking country.

What is the competitive advantage of Philippines?

English-speaking High-skilled Manpower

The main competitive advantage of the Philippine workforce is the widespread proficiency in English. English is taught in all schools, making the Philippines the third largest English-speaking country in the world.