Comparative advantage is based on:
A)capital costs
B)labour costs
C)dollar price
D)opportunity costs

Question

Quizplus · Accepted Answer

Comparative advantage is based on opportunity costs. Opportunity cost is the value of the next best alternative forgone in order to pursue a certain action. It is what you give up in order to produce a certain good or service. The principle of comparative advantage suggests that countries should specialize in producing those goods and services in which they have the lowest opportunity cost of production and trade with other countries for goods and services in which they have a higher opportunity cost of production, leading to mutual gains from trade.

Comparative Advantage Is Based On