[PDF] comparative advantage and trade

Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. Comparative advantage is used to explain why companies, countries, or individuals can benefit from trade.
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  • Why is comparative advantage important for trade?

    The benefit of comparative advantage is the ability to produce a good or service at a lower opportunity cost.
    A comparative advantage gives companies the ability to sell goods and services at reduced prices than their competitors, gaining stronger sales margins and greater profitability.

  • What is an example of comparative advantage and trade?

    For example, a trade where the U.S. exports 4,000 refrigerators to Mexico in exchange for 1,800 pairs of shoes would benefit both sides, in the sense that both countries would be able to consume more of both goods than in a world without trade.

  • What is a comparative advantage with trade countries?

    A comparative advantage exists when a country can produce goods at a lower opportunity cost compared to other countries.
    It is not possible for a country to have a comparative advantage in all goods.
    However, a country can have an absolute advantage in all goods.

  • What is a comparative advantage with trade countries?

    Comparative advantage urges nations to engage in true free trade and to specialize in areas where they have the highest expertise and most success – instead of looking to bolster weak industries from foreign competition by imposing protective tariffs that otherwise stifle the production that leads to overall gains in

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