Can comparative advantage change?
Comparative advantage is not a static concept – it may change over time. For example, nonrenewable resources can slowly run out, increasing the costs of production, and reducing the gains from trade.
How does comparative advantage affect trade?
Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. A comparative advantage gives a company the ability to sell goods and services at a lower price than its competitors and realize stronger sales margins.
How does comparative advantage affect free trade?
Popularized by David Ricardo, comparative advantage argues that free trade works even if one partner in a deal holds absolute advantage in all areas of production – that is, one partner makes products cheaper, better and faster than its trading partner.
Does China have a comparative advantage?
China’s trade pattern is influenced not just by its overall comparative advantage in labor intensive goods but also by geography. The model predicts that China has a comparative advantage in heavy goods in nearby markets, and lighter goods in more distant markets. …
Has a comparative advantage in producing lumberjack boots?
Canada has a comparative advantage in producing lumberjack boots. Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts.
Does Japan have a comparative advantage?
Comparative advantage is determined by comparing the opportunity cost of each good in different countries. Since Japan’s opportunity cost is lower, Japan has comparative advantage on fish production and will export fish. The comparative advantage of cloth is found the same way.
What has a comparative advantage in producing lumberjack boots quizlet?
Canada has a comparative advantage in producing lumberjack boots. The United States has a comparative advantage in producing lumberjack shirts. Neither country has an absolute advantage in both goods because Canada can produce more boots but the United States can produce more shirts.
Which country has an absolute advantage in producing tacos?
Similarly, 1 Hamburger costs = 10 Tacos for Mexico, 1 Taco costs = 0.1 Hamburger for Mexico. SInce. 1.8<10, US has a comparative advantage in producing Hamburgers and since 0.1<0.55, Mexico has a comparative advantage in producing Tacos….Homework Answers.
| Hamburgers | Tacos | |
|---|---|---|
| US | 100 | 180 |
| Mexico | 10 | 100 |
Which country has an absolute advantage in cloth production?
the United States
It is important to note that the United States enjoys an absolute advantage in the production of cloth and wine. With one labor hour, a worker can produce either 20 cloths or 20 wines in the United States compared to France’s 5 cloths or 10 wines.
Who has the comparative advantage in producing wine and who has the comparative advantage in producing schnitzel quizlet?
Therefore, Germany’s opportunity cost of producing schnitzel—0.33 bottles of wine—is lower than that of France—0.50 bottles of wine. We can conclude that France has the comparative advantage in making wine and that Germany has the comparative advantage in making schnitzel.
What is the primary difference between absolute and comparative advantage?
Absolute advantage refers to the uncontested superiority of a country or business to produce a particular good better. Comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production diversification.