Explain how the law of comparative advantage benefits developing countries.
What will be an ideal response?
Answer: A country has an advantage in the production of a good when this can be produced at a lower opportunity cost than its trading partner. According to this theory, as long as opportunity costs in two (or more) countries differ, it is possible for all countries to gain from specialisation and trade according to this idea. The global allocation of resources improves, resulting in greater global output and greater global consumption, allowing countries to consume outside their PPC.
You might also like to view...
Why is money as a medium of exchange important in an economy?
What will be an ideal response?
In the 1990s, Congress considered an agriculture bill that would gradually reduce price supports for many agricultural products. If the bill were to be approved, what would most likely happen to the number of families employed in agriculture?
A. It would decrease, because agricultural prices would fall. B. It would decrease, because agricultural prices would rise. C. It would increase, because agricultural prices would fall. D. It would increase, because agricultural prices would rise.
During World War II, the increasing productivity of workers who built ships was due primarily to
A) human capital accumulation through schooling and training. B) human capital accumulation by repeatedly doing the same tasks. C) discoveries of new and better technologies. D) investments by shipyards in new capital equipment.
An individual anticipating rising interest rates is likely to hold more
A) money. B) real assets. C) stock. D) bonds.